Mark Latham Commodity Equity Intelligence Service

Friday 29th May 2015
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    Oil and Gas


    Fossil industry faces a perfect political and technological storm

    The political noose is tightening on the global fossil fuel industry. It is a fair bet that world leaders will agree this year to impose a draconian “tax” on carbon emissions that entirely changes the financial calculus for coal, oil, and gas, and may ultimately devalue much of their asset base to zero.

    The International Monetary Fund has let off the first thunder-clap. An astonishing report - blandly titled "How Large Are Global Energy Subsidies" - alleges that the fossil nexus enjoys hidden support worth 6.5pc of world GDP.

    This will amount to $5.7 trillion in 2015, mostly due to environmental costs and damage to health, and mostly stemming from coal. The World Health Organisation - also on cue - has sharply revised up its estimates of early deaths from fine particulates and sulphur dioxide from coal plants.

    The killer point is that this architecture of subsidy is a "drag on economic growth" as well as being a transfer from poor to rich. It pushes up tax rates and crowds out more productive investment. The world would be richer - and more dynamic - if the burning of fossils was priced properly.

    This is a deeply-threatening line of attack for those accustomed to arguing that solar or wind are a prohibitive luxury, while coal, oil, and gas remain the only realistic way to power the world economy. The annual subsidy bill for renewables is just $77bn, trivial by comparison.

    The British electricity group SSE (ex Scottish and Southern Energy) is already adapting to the new mood. It will close its Ferrybridge coal-powered plant next year, citing the emerging political consensus that coal "has a limited role in the future".

    The IMF bases its analysis on the work Arthur Pigou, the early 20th Century economist who advocated taxes to stop investors keeping all the profit while dumping the costs on the rest of society.

    The Fund has set off a storm of protest. Subsidies are not quite the same as costs. Oil veterans retort that they have been paying 'social' taxes for a long time.

    But whether or not you agree with the IMF’s forensic accounting the publication of such claims by the world's premier financial body is itself a striking fact. The IMF is political to its fingertips. It rarely deviates far from the thinking of the US Treasury.

    It is becoming clearer that last year's sweeping deal on climate change between the US and China was an historical inflexion point, the beginning of the end for a century of fossil dominance. At a single stroke it defused the 'North-South' conflict that has bedevilled climate policy and that caused the collapse of the Copenhagen talks in 2009.

    Todd Stern, the chief US climate negotiator, said the chemistry is radically different today as sherpas prepare for the COPS 21 summit in Paris this December. "The two 800-pound gorillas are working together," he said.

    Mr Stern claims that a constellation of states responsible for 60pc of global CO2 emissions are "already on board" for a binding deal, aimed at limiting the rise in carbon to 450 particles per million (ppm) and capping the rise in temperature to 2C degrees above pre-industrial levels by the end of the century. Climate scientists warn that we are currently on course for 4C degrees.
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    Delhi power rates to hike by 5pct to 20pct

    Business Standard reported that power distribution companies would breathe a sigh of relief and consumers cry with Appellate Tribunal of Electricity directing the Delhi Electricity Regulatory Commission to determine fuel price reflection on the final electricity rates.

    According to senior executives in the 3 distribution companies operating in the national capital, the likely hike in consumer tariff across the board would be 5% to 20%.

    TATA Power Delhi Distribution Limited had filed a case against DERC, which rolled back its tariff hike in less than 24 hours, in November last year ahead of Assembly elections. The hike was proposed owing to an increase in the power purchase adjustment cost, a surcharge given to compensate the distribution companies for variations in the market-driven fuel costs.

    In its judgment, Aptel observed “Petitioner is already suffering huge financial crunch, firstly, on account of non-determination of PPAC on time-bound basis, and secondly, arising out of the revenue gap of INR 2,359 crore which is well acknowledged by the DERC. The Petitioner finds it very difficult to wait for hearing and conclusion of the tariff proceedings and ultimately tariff determination for the year 2015 to 2016.”

    Taking a stern stand, Aptel ordered “We direct the Delhi Commission to determine the PPAC for the above said third and fourth quarter within three weeks from today otherwise face the five consequences and action will be taken by this Tribunal.”

    Executives said that for TPDDL consumers, the hike would be 5% to 10% and for BSES consumers, it would lead to increase in 5% to 20%. The current average rate of electricity in Delhi is INR 2.8 per unit while the power purchase cost has gone up to INR 5 per unit.
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    China rolls out more policies to stabilize economy

    China has been intensively releasing policies since May to secure steady economic growth, with the focus on accelerating investment, as economic indicators in the first quarter and April were far from satisfactory.

    On May 11, the People's Bank of China (PBC) lowered RMB loan and deposit rates for the second time this year, following a previous cut on March 1, aiming to foster a better financing environment for domestic enterprises.
    One day after, the Ministry of Finance, the PBC and the China Banking Regulatory Commission (CBRC) jointly announced that local government bonds would be included into collateral framework.
    At an executive meeting of the State Council on May 13, it was decided that China will add 500 billion yuan of credit assets securitization pilot.
    On May 15, the Ministry of Finance, the PBC and the CBRC said in a statement that banks should not cut or suspend loans to local government financing platforms.
    On May 18, China's top economic planner -- the National Development and Reform Commission -- approved the construction of six railways stretching more than 1,000 km and likely to cost about 250 billion yuan.
    Government authorities implemented such policies after seeing "the Economic Troika" – consumption, investment and export slowing continuously till April. Consumption usually contributes to 50-60% of China’s GDP growth.
    Over January-April, total retail sales of consumer goods in China only grew 10% on year, hitting a new low since February 2006, showed data from the National Bureau of Statistics (NBS).
    During the same period, China’s investment in fixed assets rose 12% on year, the slowest growth rate since December 2000, said the NBS.
    Export value in April declined 5.4% on year, compared to 14.6% decrease in March but 48.9% increase in February.
    China's economic growth slowed to 7% in the first quarter this year, down from 7.3% in the previous quarter.

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    China invites private investors to help build $318 bln of projects

    China's state planning agency on Monday released a list of more than 1,000 proposed projects totalling 1.97 trillion yuan ($317.75 billion) that it is inviting private investors to help fund, build and operate.

    The National Development and Reform Commission said the 1,043 projects, in sectors such as transport, water conservancy and public services, will be done as public-private partnerships (PPP).

    An NDRC statement on its website did not say whether private investors will include foreign firms.

    As its economic growth slows, China is increasingly turning to PPP, a model not commonly used, to fill a widening funding gap as Beijing clamps down on traditional off-balance sheet borrowing methods used by local authorities.

    The list includes projects planned for 29 areas including capital Beijing and southeastern Jiangxi province.

    "The publication of this library of PPP projects is to help speed up the adoption of the PPP model, and to encourage and guide social capital into the provinces, autonomous regions and municipalities," the NDRC said.

    Among items on the lists, which include contact details, are a 51.9 billion yuan project to build two subway lines in the eastern city of Hangzhou, and a 6.4 billion yuan hospital in Urumqi, the capital of Xinjiang.

    Beijing is striving to rein in local government debt, estimated at around $3 trillion, but there are signs that the clampdown is having an adverse impact on existing projects.

    Chinese policymakers on May 15 ordered banks to keep lending and not reduce the size of their loans to local government projects under construction, especially urban subways and affordable housing.
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    Oil and Gas

    Platts Report: China Oil Demand Climbed 5.4% Year over Year in April

    China's apparent oil demand* in April increased 5.4% from a year earlier to 42.89 million metric tons (mt), or an average 10.48 million barrels per day (b/d), according to a just-released Platts analysis of Chinese government data.

    Apparent demand during the month was mainly supported by an increase in demand for light-end products such as gasoline.

    China's refinery throughput in April averaged 10.54 million b/d, rising 6.9% from a year earlier, data from the country's National Bureau of Statistics showed May 13.

    On the other hand, China was a net oil product exporter in April, with volumes totaling 240,000 mt, according to data released May 8 by the General Administration of Customs.

    During the first four months of this year, China's total apparent oil demand also averaged 10.48 million b/d, an increase of 4.4% over the same period of 2014. This continued to be the fastest pace of year-to-date growth since 2011 and defied a relatively weak macroeconomic outlook.

    'Apparent demand figures may be inflated compared with actual oil consumption because crucial data such as inventories are not taken into account,' said Platts senior writer for China, Song Yen Ling.
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    Marcellus faces output drop due to low gas prices

    Natural gas production in the Marcellus shale, which has grown over the past decade from next to nothing to the source of about a fifth of U.S. output, may decline for the first time if prices in the basin remain low for much longer, according to federal government data.

    The U.S. Energy Information Administration says production in the fast-growing field in Pennsylvania and West Virginia is set to remain flat for the next few years before beginning a very slow decline primarily because of depressed gas prices.

    Recent data supports signs of a slowdown. The number of rigs in the area has dwindled in recent months to its lowest since 2011, and drillers including Chesapeake Energy Corp and Cabot Oil & Gas Corp have temporarily shut in some production due to weak regional prices.

    Those low prices are threatening the basin with its first annual decline in output since producers started using hydraulic fracturing and horizontal drilling to develop the formation.

    But many private analysts say output from the Marcellus will continue to grow over the next several years as demand for gas increases and pipeline companies complete more projects to transport the fuel out of the region, boosting local prices that have fallen to their lowest in at least 14 years.

    "We see some slow growth in the Marcellus each year out to 2020" because of new pipelines, said Keith Barnett, who heads fundamental analysis at Asset Risk Management LLC in Houston.

    The EIA expects output to remain flat through 2018 before declining about 1 percent a year from 2019 to 2025, according to its 2015 Annual Energy Outlook.

    "Relatively low gas prices, combined with low oil prices, have slowed drilling in the Marcellus so production from new wells is only offsetting the decline in old wells," said EIA lead upstream analyst Dana Van Wagener.

    The EIA forecast prices in parts of the Marcellus would remain below $2 through 2016 and not exceed $4 until 2020.

    The sheer size of the Marcellus makes its continued growth vital to the expected expansion of the U.S. gas market. The basin produces twice as much gas as the nation's second-biggest shale oil and gas play, the Eagle Ford in South Texas.

    Prices this year at Dominion South E-DOMSP-IDX, an important Marcellus hub in southwestern Pennsylvania, have averaged $1.88 per million British thermal units on the IntercontinentalExchange, the lowest on record, according to Reuters data back to 2001.

    "Some production declines this year are maintenance-related and should come back quickly, while others are economic," said Charles Nevle, vice president of energy data provider PointLogic in Houston.
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    Schahin says Petrobras cancels offshore ship leases

    Brazil's state-run oil company Petrobras canceled leases with Schahin Petroleo e Gas SA for five offshore oil drilling and production vessels after a cash crunch forced the ship leaser to remove the equipment from service for nearly a month, Schahin said on Thursday.

    The decision, if upheld, will result in the loss of more than 1,000 related jobs, Schahin said, while creditors and investors stand to lose more than $4 billion. Schahin said it plans to sue Petrobras, as the oil company is known, to reinstate the contracts.

    Petrobras has been trying to slash costs in the face of falling oil prices, soaring debt and record losses related to poor planing and the fallout from a giant price-fixing, bribery and political kickback scandal.

    In the lower oil price environment, Petrobras, the world's most indebted oil company, and third most indebted non-financial company, faces a market with a growing number of unused vessels and falling day rates. Deepwater drillships that rented for $500,000 or $600,000 a day several years ago can now be leased for $400,000 or less, according to industry sources.

    The five Schahin vessels are the drillships Cerrado Sertão and Lancer and the semi-submersible oil production platforms Amazônia and Pantanal. All had been on long-term leases.

    Schahin said it was forced in early April to temporarily pull these vessels from service with Petrobras for nearly a month and move them to port after a lack of cash to pay debt led a creditor to seek the sale of assets. The creditor was leasing the Pantanal and Amazônia to Schahin.

    In late April, after renegotiating a $1 billion reduction in debt Schahin informed Petrobras that the ships were ready for service. On May 21 Petrobras canceled the leases, Schahin said.
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    Seadrill: More ultra-deepwater rigs set to be stacked

    Seadrill has agreed with Saudi Aramcoto reduce its dayrate for four jackups over a period of one year.

    Seadrill has a three-year firm contract from Aramco for the AOD rigs that is due to expire next year, although there is an option to extend until 2017.

    During 1Q, Seadrill signed one new contract, with a duration of a year, with Coastal Energy for the jackup West Cressida, with potential revenue of $35 million

    Currently the contractor has 15 rigs under construction, comprising four drillships, three semis and eight jackups. Total remaining yard instalments for these newbuilds are around $4.3 billion, with $1.1 billion already paid to the yards in pre-delivery instalments

    Seadrill says the downturn in the offshore drilling market has continued so far this year and signs point to demand remaining significantly lower than in 2014.

    The outlook for ultra-deepwater activity beyond 2015 is difficult to judge, it adds, with most oil companies not looking to add rig capacity at this point. Capacity utilization will likely dip further as the year progresses, leading to a significant number of ultra-deepwater rigs being stacked by the end of the year.

    Currently the global order book for new ultra-deepwater rigs totals 89 units, of which 29 are Sete newbuilds. At the same time, however, around 70 units are coming off contracts, many of which are due for a 15 or 20- year classing between now and the end of 2017.

    Over the longer term, Seadrill says it is difficult to picture a market that does not require deep and ultra-deepwater production to satisfy world hydrocarbon demand. During the current downturn, however, rig owners will likely continue to focus on cost-saving measures and operational performance will be a must as oil companies seek to renegotiate or cancel contracts.

    Turning to the premium jackup sector, the contractor says shelf production remains an attractive, cost- effective source of production for oil companies.

    Following the drop in dayrates, there may be increased activity in the near term for short-term contracts. However, an excess supply situation is emerging, with roughly 50 jackups set to enter service this year and 100 between now and 2017. As a result, pricing is likely to come under continued pressure.

    Operators will continue to focus their activity on the most capable units, with stacking and scrapping of older jackups accelerating. There are currently around 240 units in the global fleet that are over 30 years old, and some will probably be retired if the downturn continues, Seadrill says.
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    EIA Summary of Weekly Petroleum Data for the Week Ending May 22,

    U.S. crude oil refinery inputs averaged about 16.5 million barrels per day during the week ending May 22, 2015, 237,000 barrels per day more than the previous week’s average. Refineries operated at 93.6% of their operable capacity last week. Gasoline production increased last week, averaging about 10.2 million barrels per day. Distillate fuel production increased last week, averaging 4.9 million barrels per day.

    U.S. crude oil imports averaged 6.7 million barrels per day last week, down by 503,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 6.8 million barrels per day, 3.4% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 775,000 barrels per day. Distillate fuel imports averaged 248,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 2.8 million barrels from the previous week. At 479.4 million barrels, U.S. crude oil inventories are at the highest level for this time of year in at least the last 80 years. Total motor gasoline inventories decreased by 3.3 million barrels last week, but are near the upper limit of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories increased by 1.1 million barrels last week but are in the lower half of the average range for this time of year. Propane/propylene inventories rose 2.2 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories increased by 2.2 million barrels last week.

    Total products supplied over the last four-week period averaged about 19.8 million barrels per day, up by 3.5% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.2 million barrels per day, up by 1.6% from the same period last year. Distillate fuel product supplied averaged over 4.1 million barrels per day over the last four weeks, down by 0.4% from the same period last year. Jet fuel product supplied is up 5.0% compared to the same four-week period last year.

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    Investors Pulling Energy Sector Bets for First Time in 8 Months

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    Investors are cautiously pulling money out of energy producers for the first time in eight months, taking short-term gains after oil rebounded from a six-year low.

    More than $1.55 billion has been withdrawn this month from exchange-traded funds concentrated on energy stocks such as Exxon Mobil Corp. and Chevron Corp. It’s on pace for the first monthly setback for the group since investors began pouring into the sector in October with an eye toward profiting from an eventual recovery in prices.

    “The thesis that oil is too cheap and it has to go higher maybe is not as compelling a case with oil at $60 as it was when it was at $42,”said Ryan Issakainen, a strategist at First Trust Advisors LP in Wheaton, Illinois.

    Still, $5.4 billion remains of the new money invested in energy ETFs since the year began, suggesting that traders are trimming positions, not starting a rout. On May 1, energy ETF’s lost $475.8 million, days before U.S. crude closed at this year’s high of $60.93 a barrel on May 6, ending a 49-day rally from a six-year low of $43.46 on March 17.

    Because ETFs own baskets of shares, they enable investors to place broad bets on the direction of markets at lower cost than buying and trading individual stocks. The price of crude determines the underlying value for most energy companies.

    Investors withdrawals from energy ETFs so far this month include $806.8 million from the Energy Select SPDR Fund, the largest energy-stock ETF, which had swelled to a record $15 billion of market value May 1.

    “The hot money, the money that’s looking for short term trades, may have taken some of those gains,” Issakainen said. “I don’t make much more of it than people making tactical moves.”

    Although withdrawals from energy ETFs have slowed in the past week, they haven’t stopped. More than $400 million was taken out of the sector in each of the first two weeks of May. Withdrawals over the past seven days were about $338 million.

    Crude may fall back further, said Chris Johnson, a strategist at Macquarie Capital (USA) Inc. in New York. “The fundamentals for quite some time haven’t supported the price rise we’ve seen,” he said. “Uptick in demand has clearly not been in line with supply.”

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    Proposed Bakken Oil Pipeline Testing Market Interest

    A unit of American Midstream Partners LP is holding a binding open season through June 22 for a new 50-mile oil pipe gathering/transportation system in McKenzie County in northwest North Dakota, the heart of the state's producing region.

    American Midstream Bakken LLC plans to transport up to 40,000 b/d of crude oil for delivery to major intrastate and interstate pipeline systems beginning in June.

    "The gathering system is essentially built but not operating," a spokesperson told NGI's Shale Daily on Wednesday. "We anticipate it will be operating in June."

    The Denver-based company said the pipe initially would be able to transport up to 15,000 b/d with a maximum capacity of up to 40,000 b/d.

    "During the binding open season, potential shippers have the opportunity to obtain crude oil transportation service on the Bakken system on a committed or uncommitted basis at various tier-based rates, according to volumes transported," the spokesperson said. "Parties interested in becoming committed shippers can do so by making long-term acreage or volumetric dedications for crude oil gathering and transportation service on the Bakken system."

    The open season also offers potential shippers the option of delivering volumes into the American Midstream gathering system via truck.
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    Saudi Aramco may raise rigs in 2016 if oil prices rise

    Saudi Aramco may raise the number of its oil and gas drilling rigs to as high as 250 next year if oil prices continue to firm and as domestic demand for gas increases, industry sources said on Thursday.

    Currently the national energy giant has 212 rigs of both types in operation and that could rise to between 220 and 250 if conditions permit, sources familiar with the plans said. "It all depends on the oil price of course," said one.

    Brent oil is now around $62 a barrel, up from a low of $45 in January though still far from the $100 mark which Saudi officials said they favoured early last year. Saudi Arabia raised its crude production in April to a record high of 10.308 million barrels per day.

    "They are looking for new rigs to replace the poorly performing rigs, and this will be to maintain potential now that demand is coming back - that is for the oil side," another source said.

    "As for the gas side, they need to add more rigs to increase production, and they are looking for deep gas." Once Aramco starts looking for shale gas in the north, the number will be even higher, he added.

    As a result of the decline in oil prices, Saudi Aramco managed to make big savings on drilling fees this year after asking for discounts from rig contractors and service companies.
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    Falcon Oil & Gas looks forward to start of Beetaloo shale drilling

    Falcon Oil & Gas told investors that the start-up of a three-well drill programme in Australia’s Beetaloo shale basin is on track for mid-2015.

    Tendering and contracting for the rig and key services are currently underway, and drilling locations have been identified.

    The wells are designed to penetrate both oil andgas sections within the Beetaloo’s Middle Velkerri shale.

    Falcon has a 30% stake in the project in which it is partnered by Australian firm Origin and Sasol.

    Philip O’Quigley, Falcon’s chief executive, said: “Our initial three well, fully funded exploration drilling campaign in the Beetaloo basin, Australia is on track to commence shortly and we are working closely with our partners Origin and Sasol to complete preparations ahead of drilling this highly attractive basin."

    O’Quigley also highlighted that there continue to be encouraging signs from the South African authorities in regards to shale exploration.

    Falcon is staked as an early mover in the nascent sector, having previously secured rights to a significant footprint of prospective acreage in the country’s Karoo basin.

    The South African Department of Mineral Resources is expected to begin issuing licences this year, O’Quigley said. And it is understood that Falcon’s application is currently being processed.

    In this morning’s first quarter results statement, for the three months to March 31, the pre-revenue exploration companyreported a $237,000 loss. It ended the period in what it called a strong financial position, with US$11.5mln of cash and no debt.

    Falcon said it maintains a focus on strict cost management and efficient operations.
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    Engie eyes oil and gas exploration-production deals

    French gas and power group Engie hopes to make acquisitions in the oil and gas exploration and production industry in the coming months, an executive at the company formerly called GDF Suez said on Thursday.

    "We want to have reserves of more than 1 billion barrels of oil equivalent," Engie head of international exploration and production Didier Holleaux told a seminar. "We have no timing for this target, but going above this level means acquisitions."

    Engie had reserves equivalent to about 760 million barrels of oil at the end of 2014, equal to 13 years of production at last year's rate of 55.5 million barrels.

    "We are looking at opportunities and we have good hopes of concluding some in the coming months," Holleaux said.

    Asked about Engie's reported interest in Canadian oil group Talisman Energy early in 2014, Holleaux said the group had considered looking at a possible bid.

    "We looked at it of course, but Talisman was too big ... We did not want to make a bid for the whole company as we had reservations about some of its assets," he said.

    Asked whether Engie had considered buying Britain's BG Group , Holleaux said that BG had been a bit too big for Engie E&P (exploration and production), and even for Engie as a whole.

    Holleaux also said that because of low oil prices, Engie planned a 25 to 30 percent cut in its exploration and production investment budget, which has stood at around 1 billion euros ($1.09 billion) a year in recent years.

    He added that large ongoing projects such as Cygnus in Britain, Touat in Algeria and Jangkrik in Indonesia would continue as planned.

    The company said in February that the budget of its E&P unit would fall by 400 million euros in the 2015-2016 period.
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    Sour is the new sweet: OPEC's view of oil quality dilemma

    The U.S. shale oil boom is turning global crude pricing on its head with the historical notion that light grades shall be priced at a premium to heavy ones quickly disappearing, according to predictions from producer group OPEC.

    The trend will have big implications for global oil flows, reducing revenues of light-oil-producing nations such as Nigeria and refiners geared toward heavy crude processing, OPEC said in a draft long-term report, a copy of which was seen by Reuters.

    "This supply glut, primarily of light sweet crudes, needs to ease sizably before the oil market steadies. Low oil prices are expected to force some of the costly light sweet crude oil to idle, but the displaced African light sweet crude is also forced to find an alternative market," OPEC said.

    This could be a challenge if oil demand growth in Asia and Europe were to stay fragile, the cartel said.

    The pressure on sour crudes is not as intense due to tightness, particularly in Europe, as a result of sanctions, war, diversions and other geopolitical issues, OPEC said.

    "The war in Syria and the sanctions on Iranian exports to the West have limited availability of sour crudes to Europe for almost three years, causing the value of regional sour crudes to be oddly higher or at small discounts in relation to the sweet crudes," the report said.

    It said turbulence in Iraqi production and exports from the country's north also contributed to the tightness in sour grades, as did Russia's decision to divert some of its exports to the Asia-Pacific at the expense of European markets.

    More pressure on light sweet crudes is also coming from the fact that most new, sophisticated refining capacities around the world have been designed to process heavy crudes on expectations that light oil would remain scarce.

    As a result, most refiners were unable to take advantage of cheaper-than-expected light grades due to limited light conversion refining capacity, particularly in the United States, the OPEC report said.

    "It is also difficult to justify altering the configuration of deep conversion refineries after the huge investments that were put into their upgrading prior to the tight oil boom, when the sweet/sour spread was wide enough to justify building such heavy conversion units," it said.

    It added that shale gas developments in North America were poised to bring vast quantities of low-priced ethane, which will increasingly displace naphtha and gasoil from global markets.

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    Ithaca Energy shares slide after disclosing North Sea dispute

    London-listed shares in oil and gas company Ithaca Energy fell by as much as 18 percent after the Calgary-based firm said it had received a legal claim regarding its Greater Stella Area oil field in the North Sea.

    The company, which denied any wrongdoing, said a statement of claim had been lodged complaining it had misrepresented the schedule for completing modifications at a floating production facility.

    Ithaca said in February that modifications to the "FPF-1" facility, being carried out by UK oil services firm Petrofac Ltd , would not be completed until 2016.

    Ithaca noted that the statement of claim had come from a law firm that advertises itself as undertaking investor law suits.

    Toronto-based law firm Morganti Legal said in March that it was investigating whether Ithaca's views about the completion date of FPF-1 were "overly optimistic".

    Morganti and Petrofac were not immediately available for comment.

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    BP and Kansai Electric entered into a LNG sales and purchase agreement

    BP and The Kansai Electric Co., Inc. (Kansai Electric) today entered into a sales and purchase agreement for liquefied natural gas (LNG), and a cooperation agreement for the purpose of exploring opportunities for business collaboration.

    Under the agreements, BP will provide Kansai Electric with up to 13 million tonnes of LNG over 23 years, from BP’s diverse portfolio of LNG sources. In addition, the agreements provide for Kansai Electric and BP to explore areas of cooperation across a wide range of LNG business activities such as LNG trading, and optimisation of LNG ship operations.

    Paul Reed, Chief Executive of BP Integrated Supply and Trading, said, “BP highly appreciates the long-term relationship with Kansai Electric that has resulted in the conclusion of these new LNG sales and co-operation agreements. Building on a separate LNG sale and purchase agreement signed in 2013, this new LNG deal entails additional supply from BP’s portfolio. We are very pleased that Kansai Electric and BP have agreed this expanded LNG business and we look forward to working together to explore areas of further cooperation.”

    The Kansai Electric Power Co., Inc. is Japan’s second largest electric utility, with 13 million customers and 22,000 employees. It was established in 1951.

    BP is active in many of the major LNG producing regions as well as in the main LNG markets. It is involved in LNG projects in Australia, UAE, Indonesia, Egypt, Trinidad and Angola.

    BP has a liquefaction tolling agreement for over 4.4 mtpa LNG capacity in train 2 of the Freeport LNG Project in Texas, USA (Freeport). The project is currently under construction with production from train 2 of Freeport expected to begin in 2019.
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    OPEC sees rivals boosting oil output despite weak prices

    The North American oil boom is proving resilient despite low oil prices, producer group OPEC said in its biggest and most detailed report this year, suggesting the global oil glut could persist for another two years.

    A draft report of OPEC's long-term strategy, seen by Reuters ahead of the cartel's policy meeting in Vienna next week, forecast crude supply from rival non-OPEC producers would grow at least until 2017.

    Sluggish global demand for oil means the call on OPEC's crude will fall from 30 million barrels per day (bpd) in 2014 to 28.2 million in 2017, effectively leaving the group with two options - cut output from current levels of 31 million bpd or be prepared to tolerate depressed oil prices for much longer.

    "Since June 2014, oil prices have experienced a significant reduction, reaching levels even lower than the crisis experienced in 2008, yet non-OPEC supply is still showing some growth," the OPEC report said.

    Shale oil production has proved to be more resilient than many had originally thought.

    "Generally speaking, for non-OPEC fields already in production, even a severe low price environment will not result in production cuts, since high-cost producers will always seek to cover a part of their operating costs," the OPEC report said.

    "For future non-OPEC production, only expectations of an oil price environment in the long-term below the marginal cost of production may deter substantial non-OPEC developments. Over the very long term, the economic threshold at which oil companies invest in upstream projects likely reflects their long-term oil price expectations."

    It also said that since 1990, most of the forecasts concerning future non-OPEC oil supply have been pessimistic and often erroneous: "For example, non-OPEC production was once projected to peak in the early 1990s and decline thereafter."

    OPEC publishes long-term strategy reports every five years. Its 2010 report did not mention shale oil as a serious competitor, highlighting the dramatic change the oil markets have undergone in the past few years.

    The long-term report is prepared by OPEC's research team in Vienna and traditionally cautions that it does not articulate the final position of OPEC or any member country on any proposed conclusions it contains.


    OPEC's ability to cut and raise production over the past decades to balance demand has earned it a reputation of being a swing producer. But the long-term report suggested it is tight shale oil that is now playing this role.

    "Recent structural changes in the growth patterns of non-OPEC supply as a result of the substantial contributions from North American shale plays might prove to be a turning point (e.g. short lead times of the projects and higher short-term price elasticity)," the report noted.

    It said new and cheaper technologies in extraction of tight crude, shale gas, and oil sands would guarantee aggregate growth at 6 percent per year and contribute 45 percent of the growth in energy production to 2035.

    "Improved technology, successful exploration and enhanced recovery from existing fields have enabled the world to increase its resource base to levels well above the expectations of the past... The world's liquids resources are sufficient to meet any expected increase in demand over the next few decades," it said.

    "With plenty of oil still left in familiar locations, forecasts that the world's reserves are drying out have given way to predictions that more oil than ever before can be found," the report said.

    By 2019, OPEC crude supply at 28.7 million bpd will still be lower than in 2014, the report said, and demand for its oil will start rising only after 2018-2019, reaching almost 40 million bpd by 2040.
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    Saudis' Drive To Kill U.S. Shale Has Backfired

    For months Saudi Arabia was cagey about its oil strategy. The kingdom claimed its decision not to cut production and stop the slide in prices was solely about letting the oil market reset itself. That charade is over.

    The Saudis now openly boast that their strategy to let oil prices collapse was an attempt to kill U.S. shale production. Citing the nearly 60% drop in the U.S. oil rig count since October and the slowing of U.S. oil production, they are claiming a brilliant triumph.

    But rather than kill the U.S. shale revolution, the Saudis have only made it more resilient, sped up its rate of technological innovation and capped oil prices for at least a half-decade or more.

    U.S. shale producers will survive and grow. American consumers, paying less for gasoline and heating oil, will be the big winners. The Saudis and their friends in OPEC, so dependent on oil-export revenue, will be the clear losers.

    The U.S. shale industry is by necessity becoming more efficient than ever. Low oil prices have become an opportunity. The Saudis have lit a fire under producers to trim the fat, deploy new productivity-boosting technologies and zero in on the most productive geology.

    The result is a rapid decline in the break-even price across shale plays. Already, analysts believe it is now $60 per barrel and before long will fall to $50.

    Goldman Sachs now predicts that prices will likely hold at $50 for at least the next five years. Shale efficiency and innovation have created a new ceiling for the price of oil. This certainly was not the Saudis' aim.

    But, as the Saudis are finding out, we are just in the early innings of a new revolution — "Shale 2.0" as Manhattan Institute fellow Mark Mills calls it. A strong, increasingly efficient and productive U.S. shale industry — powered by American ingenuity and "Made in the USA" drilling and extraction technologies — is here to stay.

    Read More At Investor's Business Daily:
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    Premier hits oil in Isobel Deep well (Falkland Islands)

    Premier Oil has announced an oil discovery at the Isobel Deep exploration well 14/20-1 in the North Falkland Basin, offshore the Falkland Islands, approximately 30km south of the Sea Lion field.

    According to Premier, the Isobel Deep exploration well has been drilled to a depth of 8,289 feet reaching top reservoir on prognosis. The bottom 75 feet of the well consists of oil bearing F3 sands.

    These sands were at a higher than expected reservoir pressure and this resulted in an influx into the well, the company said. Premier further notes that as part of the operations to remove the influx, oil was recovered from the well and appears similar in nature to Sea Lion crude.

    Premier added that as a result of the new geological information it has been decided to suspend operations on the well and release the Eirik Raude drilling rig to drill in the South Falkland Basin. The rig is expected to return to continue operations in the North Falklands Basin in August.

    Premier is now considering the optimal appraisal programme for the Elaine/Isobel complex in PL004.

    Andrew Lodge, Exploration Director, commented:

    “This is an important play opening discovery in the previously unexplored southern area of Licence PL004. The well has successfully demonstrated a trapping mechanism and the presence of moveable oil in the Elaine/Isobel fan complex.”  

    Falkland Oil and Gas Limited (FOGL) has 40% interest in the licence PL004a where the well is located.

    Tim Bushell, CEO of FOGL, commented: “We are delighted by the results of this well. Whilst it has not been possible to acquire wireline logs over the F3 reservoir (Isobel Deep), the presence of oil bearing sands is highly encouraging. FOGL believes these initial results open up an exciting new oil play in this part of PL004 and also, significantly reduce the risk on FOGL’s other prospects in the adjacent PL005 licence.
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    Sage Grouse Plan Said to Bar Drilling on Some U.S. Land

    A flamboyant bird will get new protections Thursday when federal regulators announce a plan to limit oil and gas drilling on its sprawling western U.S. habitat, which may stave off declaring the greater sage-grouse as endangered.

    With a deadline of September to decide if the chicken-sized bird is endangered, Interior Secretary Sally Jewell will unveil ways the Bureau of Land Management will conserve the bird’s habitat, according to two people familiar with the decision. More than half of the grouse’s range is on federal land spread across 11 states.

    “In a sense, BLM has been actively working to deflect a listing for some time,” said Kevin Book, an analyst at ClearView Energy in Washington, who hasn’t seen details of the announcement. “Even without the final plan, BLM has already taken at-risk areas out of play for leasing and development.”

    Long a totem of the American West, the greater sage-grouse has been at the center of one of the nation’s biggest conservation disputes, pitting energy and development interests against naturalists in lawsuits and lobbying campaigns. A decision on its status would be among the most far-reaching since the U.S. protected the northern spotted owl, disrupting logging communities in Oregon in the 1990s.

    “We’ve seen this story before with what the federal government did in Oregon with the spotted owl,” said Kathleen Sgamma, vice president of the Western Energy Alliance, which represents oil and gas producers. “We believe the science doesn’t justify these restrictions.”

    The Interior Department is set to issue proposals for 14 different areas Thursday, covering the land it oversees from Wyoming to Nevada. The plans will ban drilling and mining on some of the most pristine areas, and set protections around the leks, or areas where the birds gather in mating season, according to the people, who requested anonymity to discuss the decision before the announcement.

    It’s not clear how large the protected areas would be, and if they could be enough to avoid an endangered finding. And oil interests in the Western states may object.

    Interior’s U.S. Fish and Wildlife Service has been considering listing the bird as endangered -- prompting opposition from lawmakers and energy interests. Environmentalists say that it’s not clear BLM’s protections will be enough to ensure the bird’s protection.
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    The Tanker Market Is Sending a Big Warning to Oil Bulls

    Four months into oil’s rebound from a six-year low, the tanker market is sending a clear signal that the rally is under threat.

    A sudden surge in demand for supertankers drove benchmark charter rates 57 percent higher in the two weeks through May 20. OPEC will have almost half a billion barrels of oil in transit to buyers at the start of June, the most this year, while analysts say about 20 million barrels is being stored on ships in another indication the glut has yet to dissipate.

    The Organization of Petroleum Exporting Countries is pumping the most oil in more than two years, determined to defend market share rather than prices. A record cut to the number of active U.S. drilling rigs and billions of dollars of spending reductions by companies since last year’s price plunge has yet to translate into a slump in barrels produced. The world is producing about 1.9 million barrels a day more crude than it needs, according to Goldman Sachs Group Inc.

    “Supply of oil continues to build,” said Paddy Rodgers, the chief executive officer of Antwerp-based Euronav NV, whose supertanker fleet can haul 56 million barrels of crude. “All of this oil needs to go somewhere,”

    Daily rates for supertankers on the industry’s benchmark route reached $83,412 on May 20, from $52,987 on May 6, according to the Baltic Exchange in London. While rates since retreated to $69,594, they’re still the highest for this time of year since at least 2008.

    Brent crude futures advanced almost 40 percent from this year’s low on Jan. 13, and traded at $62.58 a barrel on the London-based ICE Futures Europe exchange at 12:53 p.m. Singapore time Thursday.

    OPEC’s 12 members have will have 485 million barrels of oil in transit to buyers in the four weeks to June 6, the most since November, Roy Mason, founder of Oil Movements, a Halifax, England-based company monitoring the flows, said by e-mail Wednesday.

    Iraq, the group’s second-largest producer, plans to boost exports to a record 3.75 million barrels a day next month, according to shipping programs.

    Spare tanker capacity in the Middle East has seldom been tighter. The combined excess of ships competing for the region’s exports stood at 6 percent last week, the lowest for the time of year in Bloomberg surveys of shipbrokers that started in 2009. While that expanded to 12 percent this week, the monthly average was still the lowest on record for May.

    Bullish oil traders may get some comfort from the U.S. Recent drops in oil inventories there are signaling a gradual easing of the glut, Paul Horsnell and other Standard Chartered Plc analysts wrote in a report May 26. It may take at least another quarter for the surplus to disappear, they wrote.

    “There still seems to be a lot of physical activity, a lot of oil on the water,” Nigel Prentis, the head of research at Hartland Shipping Ltd. in London, said by phone. While the second quarter is usually quieter as refineries switch to summer fuels for the northern hemisphere, “the market is still busy and rates are incredibly high,” he said.
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    Petrobras pays 2014 bonus despite record loss, canceled dividend

    Brazil's state-run oil company, Petroleo Brasileiro SA, will pay employees 1.04 billion reais ($331 million) in bonuses for 2014 despite recording its largest-ever loss and rejecting investor dividends, a company union said on Wednesday.

    The bonus, known as "a share in results", is a third bigger than in 2013, when the company recorded a profit, and was approved at an annual shareholders meeting on Monday, the union, known by its Portuguese initials FUP, said in a statement.

    "The shareholders of Petrobras tried hard, but this time did not receive dividends," FUP said. "Disgusted, they even criticized the company for treating the workers differently."

    Officials of Petrobras, as the company is known, did not respond to requests for comment or confirm the authenticity of a Petrobras letter dated Wednesday and addressed to FUP outlining the payments. The letter was published on FUP's website.

    While Brazil's government owns a majority of voting common shares, non-government investors, primarily holders of preferred shares, own most Petrobras stock.

    Petrobras recorded a 23.6 billion real ($7.5 billion) profit in 2013. In 2014 it had a 21.6 billion real loss, the result of a $17 billion write-down of assets as a result of a massive price-fixing, bribery and political-kickback scandal, poor planning and execution and a decline in oil prices.

    The union accused investors of "crying for their dividends."

    FUP, closely aligned with the Workers' Party of Brazilian President Dilma Rousseff, herself chairwoman of Petrobras from 2003 to 2010, applauded the company's 2014 performance, the only annual loss in at least two decades.

    "The company's positive 2014 results, along with the fabulous profits that have marked its history, are the direct result of the workers," FUP said.

    Some holders of preferred shares, the company's most traded class of stock, have explored using a Brazilian law that requires, under some circumstances, the conversion of preferred shares into common stock if minimum dividends are not paid.

    Petrobras, the world's most indebted oil company, also faces U.S. and Brazilian lawsuits over the corruption scandal. Worth $290 billion in 2008, Petrobras is worth $55 billion today.

    Petrobras, according to the unconfirmed FUP letter, agreed during contract talks to a higher 2014 bonus even if it lost money.

    In Brazil, most employees automatically belong to a union. All Petrobras employees, including senior mangers, are eligible for bonuses. Petrobras did not say which employees are eligible for payments, which will be made by mid-June.

    Attached Files
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    S.Korea's SK Innovation wants to expand U.S. shale investment

    South Korea's SK Innovation Co Ltd , which owns the country's biggest refiner SK Energy Co Ltd, said it aims to raise investment in U.S. shale fields and increase partnerships with major crude producers to stabilise energy supplies.

    The firm said in a statement on Thursday it wanted to expand its shale gas fields in Oklahoma and Texas, which it acquired last year, into nearby areas. It also aims to boost competitiveness by diversifying crude sources and cutting import costs.

    SK Innovation suffered its first loss in decades in the fourth quarter of 2014, though better margins over January to March amid weak global oil prices helped it swing back to a profit of 321.2 billion Korean won ($300.61 million).

    The statement, quoting its chief executive and president Chung Chul-khil, also said that for its troubled chemical business its growth strategy would focus on the Chinese market.

    The company said it hoped the plans would triple its domestic stock market value to 30 trillion Korean won ($27.09 billion) by 2018.
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    Gail sells some US LNG to Shell

    India's Gail has sold some of its liquefied natural gas from its US portfolio to Anglo-Dutch supermajor Shell ahead of production from early 2018, its head B.C. Tripathi said on Wednesday.

    Gail has a deal to buy 3.5 million tonnes per annum of LNG for 20 years from US-based Cheniere Energy and has also booked capacity for another 2.3 mtpa at Dominion Energy's Cove Point liquefaction plant.

    Tripathi refused to elaborate on the volumes, pricing and duration of the deal with Shell, but a trade source said Gail has sold at least 0.5 mtpa LNG to Shell, Reuters reported.

    Gail would also issue an LNG swap tender in two months to cut transport costs for supplies to India, he said, adding 0.5 million tonnes of its US LNG has already been booked by local clients while talks were ongoing with domestic and foreign firms for more such deals.

    Gail was keen to swap about 2 mtpa of its LNG, Tripathi had said in January 2014.

    India's gas demand is set to rise as the federal government has approved policies to boost power and fertiliser production using imported gas.

    Gas demand in the world's second most populous nation, however, declined in the quarter ending in April as alternative fuel like furnace oil turned cheaper due to rout in global oil markets.

    Also, prices of gas sourced under a long-term deal with Qatar have turned costly, tapering the demand for the cleaner fuel.

    He said India has used a 10% reduction permissible under a 25-year contract with Qatar's RasGas to import up to 7.5 mtpa the super cooled fuel.
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    How Russia was warned against oil output cut as prices dived

    As Russia prepares to meet OPEC next week, a briefing paper from a Moscow think tank has shed light on how the government was warned against cutting oil output late last year even though global prices were plummeting.

    Speculation was rife that Russia and the oil exporters' cartel might strike a production deal to arrest the slide when Energy Minister Alexander Novak met his Saudi Arabian counterpart last November.

    However, the think tank had already advised Novak that OPEC would not cooperate and unilateral action would be costly at a time when Russian state finances were in a dire state.

    "If Russia cuts output, OPEC will take our market share in Europe," a team led by energy expert Grigory Vygon said in the previously unpublished paper, commissioned by the Energy Ministry before the Nov. 25 meeting in Vienna.

    The paper was prepared by the Skolkovo Institute's energy team, which has subsequently set up the independent Vygon Consulting group.

    In the event, Novak opted against lowering Russia's output and two days later Saudi Oil Minister Ali al-Naimi also blocked calls at an OPEC conference for production cuts, sending crude prices to a fresh four-year low and declaring a global battle for market share.

    Six months on, the agenda at least will repeat itself next week: non-OPEC producers led by Russia are scheduled to meet the cartel in the Austrian capital on Wednesday and Thursday, before an OPEC conference on Friday.

    Benchmark crude at around $63 a barrel remains well below where it was before last November's OPEC meeting. However, it has recovered from a low of $46 hit in January, easing the pressure for radical action.

    Therefore OPEC, which controls a third of the global oil market, and Russia, which produces another 12 percent, are unlikely to reverse their output strategy.

    The confidential briefing paper, seen by Reuters, said that should Moscow decide to cut output or exports, similar quality OPEC crude - mainly from Saudi Arabia but also from Iran and Libya - would replace as much as 1 million barrels per day (bpd) of Russian oil. That is equivalent to a tenth of both Russian production and of European consumption.

    Vygon predicted Saudi Arabia would refuse to cut production as it could weather the low oil price. Instead, OPEC's leading member would use the opportunity to win market share at the expense of rival and more costly producers, such as in the United States or Russia, it said.

    That has proven true. Far from cutting, OPEC has increased production by 1.4 million bpd over the past year with Saudi output alone jumping by 450,000 bpd year-on-year to 10.15 million in April.

    The paper also predicted that U.S. shale oil producers would prove resilient in maintaining output, even with the much lower prices. That has also proved correct, at least so far.

    Russia has pushed its own production up by 200,000 bpd over the past year, hitting an all-time high of more than 10.7 million in April. This is mainly thanks to rising output at state-run Gazprom and freshly nationalised Bashneft.

    However, a source close to the Russian team responsible for talks with OPEC said that much has changed since then. "The oil price has bounced back and Russia is kind of coping. There is also an understanding that the Saudis will not cut as they would lose market share, so nor should Russia," said the source.

    "The consultations (with OPEC) are under way," he said. "Look at the forecasts we had produced earlier. In that sense, you will understand that we are within the (pricing) corridor that we had forecast."
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    North Sea oil industry to get boost from falling costs

    After months of bad news, oil companies working in the North Sea can finally see a glimmer of hope after a leading energy consultant forecast operating costs to plummet over the next two years.

    Wood Mackenzie now expects costs in the North Sea, which is one of the most expensive and challenging regions for operators, to fall by 15pc through to the end of 2016.

    "High capital and operating costs are the single biggest issue for companies in the UK and Norwegian sectors of the North Sea today," said Malcolm Dickson, principal North Sea analyst for Wood Mackenzie.

    "Even before the oil price crash, developing and operating fields while making a profit was challenging and we expected some cost deflation in the sector as activity cooled. The drop in oil price has accelerated the need for lower costs, as companies adjust to protect their cash flows, and changes are now required to correct the industry's cost base."

    Cost escalation in the North Sea basin has been a persistant concern for the industry, which had been heightened by the 40pc decline in oil prices since last November.

    The UK's main oil producing area has found itself caught in the crossfire between US shale drillers and members of the Organisation of Petroleum Exporting Countries (Opec) who appear to be fighting an oil price war to win greater market share.

    However, output from the North Sea has been under pressure for years before Opec decided to keep its production levels unchanged last year effectively triggering the current price war.

    "We have already seen rig rates dropping significantly with reductions of up to 20pc for new contracts agreed in 2015," said Mr Dickson. "40pc of mobile rigs in the UK and 23pc in Norway are either currently without contract or due to come off by the end of 2015, giving scope for high reductions in future contract renewals."

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    Texas police evacuate people near dam after deadly storms

    Police evacuated residents living near a dam southwest of Dallas that was poised to burst on Wednesday due to surging floodwaters as emergency officials searched for bodies from storms that killed at least 17 in Texas and Oklahoma.

    Water was topping the Padera dam, about 25 miles (40 kms) southwest of Dallas, and Midlothian Police said they have called on people living downstream to evacuate their houses and move livestock to higher ground in case the structure gives way.

    Meanwhile, the death toll is set to rise with numerous people still missing in Texas after the storms slammed the states during the Memorial Day weekend, causing record floods that destroyed hundreds of homes, swept away bridges and stranded more than 1,000 motorists on area roads.

    "Right now we still have a lot of our neighborhoods underwater," Michael Walter, a spokesman for Houston's Office of Emergency Management, told NBC's "Today" program.
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    LPG turns ugly in Houston.

    Image title
    MGL: US LPG prices are crashing to new lows here. 

    LPG is one of those also-ran commodities, we use it for lighter fuel, portable stoves, and the Indians use most of all for cooking.

    Its produced in quantity by wet gas wells, and by Oil shale wells. Eagle Ford producers typically have up to 20% of volume in LPG, for example. 

    US demand is pretty constant, growing somewhat as chemical plants gradually debottleneck. So it must be supply thats increasing.

    That must mean either Natural Gas supply or Oil, or both supply in the US is increasing. That means the market is way, way, wrong in assuming a supply contraction this year.

    Image title

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    Low oil and gas prices spur Vanguard’s two big acquisitions

    Low oil and gas prices contributed to Vanguard Natural Resource’s decision to make two significant acquisitions in less than 40 days, the Houston company’ chief financial officer said Tuesday morning.

    Vanguard last Friday that it is buying up Eagle Rock Energy Partners. That came after its deal to buy LRR Energy LP on April 20. LRR — an affiliate of Lime Rock Resources. Both are onshore, exploration and production master limited partnerships based in Houston. MLPs are tax-advantaged corporate structures.

    “One larger, more diverse company was better equipped in the current commodities price environment,” Vanguard Executive Vice President and CFO Richard Robert said in a conference call on Tuesday, noting that Vanguard received consent from LRR to proceed with both deals simultaneously.

    Robert argued the expanded Vanguard will be “well positioned when the commodity price recovers.” The two deals are both expected to close in the third quarter. Vanguard is postponing its June 4 annual meeting for a to-be-determined date so unitholders can also vote to approve the Eagle Rock deal. Robert said Vanguard is unlikely to pursue any other deals until after the two purchases close. But he noted that “there’s still some good deals out there.”

    Vanguard is paying $474 million to acquire Eagle Rock, not counting $140 million in assumed debt. Vanguard, likewise, is dishing out more than $250 million for LRR, but that does not include another $288 million in assumed net debt.

    Robert said the deals strengthen Vanguard’s asset base while also boosting its liquidity and flexibility to reduce its debts moving forward.

    The Eagle Rock deal, in particular, boosts Vanguard’s growing presence and assets in the Mid-Continent region, including the Anadarko and Arkoma basins and more. Robert said Vanguard is “very fortunate to be adding another prolific basin that is in the beginning stages of production.”

    He said Eagle Rock unitholders will own 22 percent of the combined entity while LRR unitholders will hold 12 percent. The merged Vanguard will have big presences in the Mid-Continent region, as well as the Permian Basin, the Gulf Coast and up into Colorado, Wyoming, Montana and North Dakota.
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    Crescent Point to acquire Legacy for shares, debt worth C$1.53 bln

    Crescent Point Energy Inc, Canada's No.4 independent oil and gas producer, said on Tuesday it has agreed to acquire Legacy Oil + Gas Inc for shares and debt worth C$1.53 billion ($1.23 billion), adding oil production in its core regions in Western Canada and North Dakota.

    Crescent Point is offering 0.095 of its own shares for each Legacy share. Based on Crescent Point's closing price on Monday of C$30.00, the offer is worth C$2.85 per Legacy share.

    Crescent Point said its offer was a 36 percent premium to Legacy's price prior to April 17, when the company was targeted by activist shareholders determined to place representatives on Legacy's board.

    Legacy shares last traded at C$2.92 before being halted on the Toronto Stock Exchange.

    Crescent Point said the acquisition, which has been approved by Legacy's board, would add 22,000 barrels of oil equivalent per day to its production. Nearly 70 percent of that production is in the company's core areas in Saskatchewan, Manitoba and North Dakota.

    "Legacy's combination of high-growth resource play assets and high-quality, low-decline conventional assets are a tremendous fit with Crescent Point and are expected to enhance our long-term dividend plus growth strategy," Scott Saxberg, Crescent Point's chief executive, said in a statement.

    Crescent Point said it is offering a total 18.97 million shares and will assume Legacy's C$967 million in debt.

    To pay for its acquisition, Crescent Point will sell 21.06 million shares to a group of underwriters led by BMO Capital Markets and Scotiabank to raise gross proceeds of about C$600 million, though the company can issue a further 3.16 million shares if demand warrants.

    Crescent Point said the acquisition will boost its production and cash flow while adding about 102.7 million barrels of established reserves.

    The acquisition will raise Crescent Point's expected average production this year by nearly 7 percent to 162,500 boepd.
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    Texas oil patches brace for more rains, possible floods

    Texas oilfields could see strong rains and thunderstorms later this week, though they were spared the heaviest flooding that struck central and eastern Texas over the Memorial Day weekend, the National Weather Service said on Tuesday.

    There were reports of flooded roads in parts of the Permian Basin of west Texas and swollen creeks in the Eagle Ford shale area of south Texas, the two largest onshore oil producing regions in the United States.

    But there were no reports of extensive damage or prolonged road closures in the oilfields, regional meteorologists said.

    The rest of Texas, including areas around Austin, Dallas, and Houston, saw significant damage and some deaths.

    The National Weather Service said the likelihood of rain and storms would rise through the remainder of this week.

    "Chances of thunderstorms will increase Wednesday and Thursday," said Alec Lyster, senior meteorologist for the National Weather Service in Midland. "Storms either of those days is definitely a possiblity."

    Meteorologists said that latest bout of rain could mark an end to a prolonged drought that has affected Texas.
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    Noble’s dispute in Israel could resolve with resignation of antitrust commissioner

    The anti-trust regulator who raised questions about Noble Energy’s control over the country’s oil and gas resources plans to step down, a move that could potentially resolve the dispute that has stalled Noble’s investment there.

    Israel’s Antitrust Commissioner David Gilo announced that he would resign in August because the government was pressing forward with a deal that undercut competition to develop the country’s newly discovered energy reserves, according to reports in Reuters.

    An inter-ministerial alliance recently agreed to a deal that would allow Noble to continue its plans to operate the Tamar basin and sell its gas by divesting of some assets there, and jointly market gas from the Leviathan basin, according to reports in The Jerusalem Post. But the country’s antitrust commissioner has disagreed with the proposal.

    Noble Energy said in a statement that it remains actively engaged in dialogue with the government to resolve antitrust concerns, but until a final agreement is reached, the Houston-based oil company will not move forward with developing the Leviathan and expanding the Tamar.

    “A stable and attractive investment climate is necessary for continued exploration and development, investment in infrastructure and the entry of new companies into the oil and natural gas sector,” spokeswoman Paula Beasley said in a statement Saturday. “We are working cooperatively with the government in their efforts to develop an appropriate and workable solution.”

    Keith Elliott, who oversees Noble’s Eastern Mediterranean operations, recently spoke with the Houston Chronicle about the ongoing negotiations and the future of the company’s investment in the Mediterranean.

    “We’ve been in Israel for a long time,” he said. “We’ve been through ups and downs. We’ve been through the emergence of the regulatory environment there from the day when there was nothing offshore. And we’ve been through period of conflict and our commitment has been there. We are comfortable working with Israel. We just need to have these things resolved so we can move forward.”
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    Ecopetrol foresees $6 bln/yr investment budgets through 2020

    Colombia's Ecopetrol SA expects its annual investment budgets to be around $6 billion through 2020, it said in a strategic plan published on Tuesday, down from recent years as it pursues a structural savings target of $1 billion a year.

    The plan is the first since Juan Carlos Echeverry took over as CEO in early April. It foresees production of 870,000 barrels per day by 2020, up from 722,000 barrels currently, and for the company to add 1.7 billion barrels of proven reserves by the same year.

    Ecopetrol plans to invest around $4 billion per year in production and boost reserves by increasing the amount of oil that can be recovered from existing fields through technologies including injection of liquids and gases.

    The exploration budget, which was slashed to $600 million this year, is expected to be between $1 billion and $1.5 billion per year until 2020, the company's e-mailed presentation said.

    Ecopetrol is by far the Andean country's biggest oil company and oil sector representatives say spending on exploration is increasingly urgent as reserves fall to less than seven years' worth at the country's current million-barrels-per-day output.

    The company said it is budgeting for an accumulated $2.5 billion in spending on transport and logistics between now and the end of the decade.

    Ecopetrol's target of saving a total of $6 billion through 2020 is part of an efficiency drive that will seek savings across the company's operations. It also aims to cut net debt over the period but did not give a target figure.
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    There is a disconnect between crude oil futures and the physical markets

    “Like pushing a rock up a hill”

    That’s how some trader’s view the current disconnect between the physical market for crude oil and the futures market with speculators pushing futures prices higher while the physical market remains moribund.

    Before continuing, it’s important to make the distinction between the physical market for crude and the crude futures market.

    Physical (also known as cash) market prices are determined by the supply and demand for physical crude. Here traders buy oil from the producer and sell it to the refiner, for immediate delivery. Physical buyers and sellers have a direct pulse on the market and may feel immediately when it is well supplied, or not.

    Futures prices, on the other hand, are determined by the supply and demand for crude futures positions. Futures markets provide a means for trading the probability of where crude prices will be at certain points in the future; this allows physical market participants a means by which they can hedge their position and so reduce risk.

    The physical crude market tends to show weakness (i.e. too much crude swashing about) when the premium for the best crude grades weakens against the benchmark Brent. One of the most favoured grades in Europe is Azeri Light due to its high quality.

    Over the past couple of months physical crude traders have noted the weak premiums for Azeri Light versus Brent as other cargoes, particularly from West Africa compete to supply crude into an already oversupplied Atlantic Basin market.

    This apparent disconnect between the futures and the physical market appears eerily similar to mid-2014, just prior to crude prices collapsing. So is the current weakness in the physical crude market a precursor to an imminent weakening in crude futures prices?

    Don’t bet on it - at least not based solely on what the physical market is doing.

    While the physical fundamentals of supply and demand prevail eventually, the physical market may not always be able to anchor futures prices for days, months or even years.

    If commodity futures prices rise too much, perhaps as a result of speculative interest, as there is now, physical supplies will start to be delivered against short positions (a manufacturer looking to hedge its inventory of raw materials might have this kind of position).

    In practice, there is never enough physical material readily available to deliver against all the short positions, so rising futures prices can only be offset by buying back crude futures contracts rather than making physical delivery. It takes time to divert and accumulate sufficient physical crude supplies to meet a rise in futures prices driven by speculative rather than fundamental factors.

    To get an idea of the extent to which this process is occurring take a to look at the net contract short position for commercial hedgers from the US CFTC weekly Commitments of Traders report. Back in mid-2014 the net short position amongst commercial hedgers (actual producers and users of crude) rose to around 500,000, a record level. This position has since fallen to just over 300,000, but it is still high on an historical basis.

    As we know from the months leading up to the oil market crash that began in the middle of 2014, oil futures prices can divorce themselves from the physical fundamentals for a long time.

    The price of crude, as with any other commodity is only worth what someone is prepared to pay for it. The market’s perception of scarcity in mid-2015 is such that participants in crude futures markets are now willing to pay less than half what they were paying just one year ago.

    While theory suggests crude futures markets are anchored to the physical market as contracts expire, in reality the link is a lot more tenuous. As with the myth of Sisyphus the rock will eventually start to roll back. Timing when that will take place, and the catalyst involved, is a whole different matter.

    Read more:

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    China's CNPC makes first tight oil find over 100 million tonnes

    Chinese state-owned energy giant China National Petroleum Corp (CNPC) has discovered more than 100 million tonnes of tight oil geological reserves in its Changqing field, a company-run newspaper said on Tuesday.

    The discovery, located in the western province of Shaanxi, is the first Chinese tight oil find to surpass 100 million tonnes, the China Petroleum Daily said.

    Technically recoverable reserves may be considerably lower. Tight oil production capacity in the Ordos basin, where Changqing is located, is more than 1 million tonnes, the paper said.

    CNPC is Asia's largest oil producer and the parent of PetroChina Co Ltd..

    In the first quarter of 2015, Changqing produced 6 million tonnes of crude oil, or 487,600 barrels per day, according to the official Xinhua News Agency's China Oil, Gas & Petrochemicals (OGP) newsletter.
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    Inpex, Chevron facing delays as worries grow on LNG start-ups

    Japan's Inpex Corporation is thought to be struggling to keep its $US34 billion ($A43.5 billion) Ichthys liquefied natural gas project in northern Australia on schedule because of bottlenecks at a South Korean shipyard that is manufacturing a massive offshore platform.

    The problems highlight the huge risks that remains in the start-up of $US180 billion worth of LNG projects in Australia during the next two or three years.

    Respected energy consultancy Wood Mackenzie is predicting delays not just at Ichthys but at Chevron's large Wheatstone LNG project in Western Australia, and a likely slower-than-expected ramp-up at the over-budget $US54 billion Gorgon project amid various challenges at the sites. The combined impact would be an 11-million-tonnes reduction in Australia's 2015-19 LNG output  than the consultancy was forecasting six months ago.

    The 120,000-tonne offshore platform for Ichthys, the world's largest semi-submersible platform, is due to set sail for Australia in early 2016 from the Samsung Heavy Industries shipyard in Geoje, South Korea. But the yard is stretched with other major construction projects, including Royal Dutch Shell's giant Prelude floating LNG vessel, also to be sited off the far north-west Kimberley coast.

    A second large structure, a ship to be used to produce light oil at the Ichthys field in the Browse Basin, is being built at the Daewoo shipyard, also in Geoje.

    Inpex chief executive Toshiaki Kitamura told investors earlier this month that the Ichthys project was 68 per cent complete and confirmed the start-up for late 2016, a date reiterated by Inpex's head in Australia, Seiya Ito, last week.

    But the overstretched shipyard  has long been seen as a problem, with Ichthys managing director Luis Bon last year describing it as a "hot-point issue".

    Inpex general manager external affairs Bill Townsend said on Friday that areas of the project were "somewhat behind" and pointed to the "heavy workload" at the Korean yards.
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    Wildfire shuts down about 9 pct of Alberta crude output

    A wildfire raging in northeastern Alberta has shut down around 233,000 barrels per day (bpd) of production at three oil sands projects and is expected to remain out of control for "some while yet," a provincial government spokesman said on Monday.

    Over the weekend, Cenovus Energy Inc and Canadian Natural Resources Ltd evacuated staff and halted output at two sites as a precaution against the rapidly spreading forest fire.

    On Monday, CNRL said it also cut production at its nearby Kirby South thermal project to 12,000 bpd from around 30,000 bpd.

    In total, roughly 9 percent of Alberta's crude output is offline as a result of the fire, with no clear indication of when production can resume.

    The Alberta government's wildlife information officer, Geoffrey Driscoll, said the fire, which started on Friday, has grown to more than 8,000 hectares and is still out of control.

    "With the warm weather, it's not going to be under control (on Monday) for sure, at least until we get some more firefighters and or we get some weather that helps cool down the area," Driscoll said.

    Cenovus evacuated about 1,800 workers and shut down production at its Foster Creek oil sands site, situated on the Cold Lake Air Weapons Range (CLAWR) about 25 kilometers (15.5 miles) north of the wildfire.

    The project, a 50-50 joint venture with ConocoPhillips , averages about 135,000 bpd.

    "We continue to monitor the situation and we're preparing to get back in there quickly to start up our operations whenever we get word that the situation is under control," Cenovus spokesman Brett Harris said.

    Harris said the full impact on Cenovus production would not be clear until the fire is under control, but the company estimated if the shutdown lasts five days and a gradual ramp-up starts after that, the impact would be about 5,000 bpd for the quarter.

    CNRL evacuated personnel from its Primrose oil sands project due to the nearby fire and shut in about 80,000 bpd of crude production.

    The government declared a province-wide fire ban on Monday after an unusually hot dry spring.
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    US land rigs up, offshore down

    Weekly Summary: Rigs engaged in exploration and production in the U.S. totaled 885 for the week ended May 22, 2015. This was down by three from the previous week’s rig count and indicates the lowest level in almost six years.

    Following the latest decline, the current nationwide rig count is now less than half of the prior-year level of 1,857. It rose to a 22-year high in 2008, peaking at 2,031 in the weeks ending Aug 29 and Sep 12.

    Rigs engaged in land operations rose by 3 to 853. Inland waters activity was down by 1 to 3 rigs and offshore drilling was down by 5 to 29 units.

    Natural Gas Rig Count: The natural gas rig count decreased by 1 to 222. As per the most recent report, the number of natural gas-directed rigs is down 73% from its recent peak of 811 reached in 2012. In fact, the current natural gas rig count remains 86% below its all-time high of 1,606 reached in late summer 2008. In the year-ago period, there were 325 active natural gas rigs.

    Oil Rig Count: The count which rocketed to 1,609 in Oct 2014, the highest since Baker Hughes started breaking up oil and natural gas rig counts in 1987, dived further (by 1) to 659. As a result of this drop, the current tally is now the lowest in more than four and a half years and well below the previous year’s rig count of 1,528.

    Miscellaneous Rig Count: The count (primarily drilling for geothermal energy) was down by 1 from the previous week to 5.

    Rig Count by Type: The number of vertical drilling rigs was up by 3 to 117, while the horizontal/directional rig count (encompassing new drilling technology that has the ability to drill and extract gas from dense rock formations, also known as shale formations) was down by 6 to 768. In particular, directional rig units decreased by 4 from last week’s level to 85.

    Gulf of Mexico (GoM): The GoM rig count was down by 5 to 28.

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    China's natural gas consumption down 5.9% in Apr

    China's consumption of natural gas decreases 5.9% year on year to 12.7 billion cubic meters (cu m) in Apr 2015, according to the National Development and Reform Commission.

    Last month, the country's natural gas output declined 2.0% year on year to 9.8 billion cu m, while its natural gas imports plunged 20.3% to 3.8 billion cu m.

    In Jan-Apr 2015, China's consumption of natural gas reached 62.9 billion cu m, up 2.4% than that in the same period of previous year.

    The country saw its natural gas output increase 4.7% to 45 billion cu m in the first four months. Its natural gas imports totaled 19.8 billion cu m in the period, reflecting a year on year growth of 7%.
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    Saudi Arabia rewrites its oil game with refining might

    Saudi Arabia's rapid transition into one of the world's largest oil refiners adds an extra dimension to the oil exporter's role as the driver of OPEC policy.

    When it attends OPEC's next meeting in two weeks, it does so with major new state-of-the-art oil refineries that can profit from cheaper crude and reviving world fuel demand - exactly as international oil firms have over the past six months.

    The kingdom now has stakes in more than 5 million barrels per day (bpd) of refining capacity, at home and abroard, landing it a place among the global leaders in making oil products. Its own target of 8-10 million bpd of refining firepower would eclipse even ExxonMobil.

    "Saudi have moved into the product business in a big way," said Fereidun Fesharaki, chairman of FGE energy.

    Its oil trading arm, Aramco Trading, could soon find at least two thirds of its trading focused on products such as diesel, gasoline and heating oil rather than crude, Fesharaki said.

    Years of investment was designed to fuel the transport, air conditioning and power generation for the kingdom's economic growth. But as OPEC members fight for market share, Aramco's refineries also give it a natural outlet for its 10 million bpd of crude production.

    "In contrast with the crude market which is shrinking, the product market is becoming more global," said Antoine Halff, chief oil analyst with the International Energy Agency.

    The crude oil price rout this year catapulted refining to the fore; trading and refining last year soared to 60 percent of integrated oil companies' first quarter earnings, compared with 18 percent last year, according to Reuters calculations.

    "The crude is so cheap it's pretty much free for them," said Amrita Sen of Energy Aspects. "The margins are going to be massive. It makes trade flows in products very different."

    "The Saudis have a much wider market there because they are competing globally," Halff said. "They diversify vertically by capturing different parts of the value chain and it becomes a hedge and it gives them a lot more market access."

    Aramco has added more than 1 million bpd in capacity through a controlling stake in Korea's S-Oil as well as its two heavy hitting refineries at home, Yanbu and Yasref, both with 400,000 bpd in throughput. Jizan, due on in the Kingdom in 2018, would add a further 400,000 bpd.

    The growth puts Aramco's owned or equity stakes refining at 5.4 million bpd, at least 40 percent above a decade ago. Aramco itself markets more than 3 million bpd of that, tying it with Shell as the world's fourth largest oil refiner.
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    India plans new oil subsidy rules to push ONGC stake sale

    India plans to reform rules governing the level of discounts upstream state oil firms including ONGC offer to retailers, a senior finance ministry official said on Friday, a move that could expedite the sale of a stake in the company.

    The government hopes to sell shares in ONGC and India Oil Corp. to raise about a third of its budget target for asset sales of $11 billion - and reduce its fiscal deficit to 3.9 percent of GDP in the 2015/16 fiscal year.

    Currently ONGC (Oil and Natural Gas Corp), Oil India and GAIL (India) sell crude and fuels like cooking gas at discounted rates to partly compensate retailers for losses they incur on selling fuels at government-set rates.

    But the finance ministry and oil ministry are in talks to work out a mechanism for easing the subsidy burden for the upstream companies, Ratan P. Watal, expenditure secretary at the Ministry of Finance, told reporters on Friday.

    Earlier, sources told Reuters that the oil ministry had set a new subsidy formula for the April-June quarter that would exempt upstream companies from discounting sales of crude oil and refined products if global oil prices are up to $60 per barrel.

    Reuters reported exclusively earlier that the oil ministry had set interim rules to exempt upstream state firms from giving any discounts on crude and refined fuels if global oil prices average up to $60 a barrel this quarter.

    For prices beyond $60 a barrel the companies will have to give a discount of 85 percent of the incremental oil prices and this discount will rise to 90 percent for additional prices beyond $100 a barrel.

    ONGC chairman D.K. Sarraf later confirmed receiving a government order concerning the subsidy formula and said the details were in line with Reuters' reporting.

    On the top of the discount, state-run fuel retailers - Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum - are compensated by the finance ministry for selling cooking gas and kerosene at cheaper rates.
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    Chinese independents get foothold in LNG trade as restrictions lifted

    China's independent buyers of liquefied natural gas (LNG) are taking their first cargoes of the fuel as Beijing permits third-party use of idle capacity at import terminals and approves the new players' long-term plans to build their own facilities.

    Privately run city gas distributor ENN Group and onshore LNG investor Guanghui Energy Co Ltd were among the first to start importing spot cargoes, renting space at PetroChina's underutilised receiving terminals at Rudong and Dalian and each bringing in at least one cargo since late 2014, according to company officials.

    Other new importers include trader JOVO Group and independent oil and gas company Pacific Oil and Gas as China works to meet clean energy targets calling for natural gas' share in its energy mix to double.

    Beijing is freeing up the nation's LNG trade as part of broad reforms that allow private companies to invest in oil and gas exploration as well as pipelines and tank farms, and to engage in importing and exporting. The aim is to help secure supplies while boosting competition and efficiency in an energy sector long dominated by state firms.

    Last year in April, Beijing said parties such as ENN Group - parent of Hong Kong-listed ENN Energy Holdings - and Shenzhen Gas could lease and use that idle infrastructure, and independent energy companies and small buyers are taking advantage of Asia's low spot prices to bring in LNG at a lower cost than some of the supplies contracted by state importers such as PetroChina.

    Companies are also building and planning their own receiving and storage facilities so they can have more control over their future purchase prices and volumes.

    While welcoming the new buyers, suppliers remain cautious, especially when negotiating longer-term supplies with the independent companies.

    "They don't really have a strong balance sheet, or lack a pipeline network," said a marketing executive with a North American exporter.

    Recently a small Chinese buyer had to turn away an LNG delivery from Spain's Gas Natural Fenosa because it lacked the credit rating to swing the deal, according to industry sources and ship tracking services on the Thomson Reuters terminal.
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    Core Bakken assets remain economical despite low oil prices,

    While the 12 counties with Bakken production between North Dakota and Montana have lost the majority of their horizontal rigs over the last eight months, core areas of the shale play remain attractive, especially as oil prices creep towards $70/bbl, says an analyst with research and consulting firm GlobalData.

    According to Jonathan Lacouture, GlobalData’s upstream analyst for onshore Americas, IP30 rates, which measure a well’s average production over its first 30 days of active life, show that there are clear productivity differences between each county.

    Lacouture explained, “Mountrail and Mckenzie Counties both possess median IP30 values of 550 bopd, between 17% and 50% greater than the other counties which contain productive Bakken areas.

    “Both counties possess break-even prices that still generate profit in the current market; however, the margin of this financial gain is dramatically lower than the same date last year. This is reflected starkly by the over 50% drop in active rigs capable of multi-stage lateral drilling in the Bakken.”

    The analyst adds that rig activity will likely remain depressed until prices are up to twice their break-evens. Rig counts have already begun to level off in core areas as the price continues to slowly rise and economic returns increase with it.

    Lacouture continued, “The scalable nature of the Bakken affords it a flexibility, which allows marginal cost barrels to be gradually added or removed, as quickly or slowly as prices allow.

    “However, the more frontier counties, which have lost virtually every active rig, may not see renewedexploration and production efforts in the near term, as they require higher oil prices to remain worthwhile investments.”

    Bakken crude also sells at a relatively large discount to WTI crude due to high transportation costs, contributing further uncertainty to already wary investors and operators.

    The analyst concluded, “If a given Bakken well produces over 50% of its total estimated ultimate recovery in the first nine months of activity, withholding on drilling and completing wells by a few months to a year, until prices climb to, say, above $70/bbl, will prove more economically fruitful than the alternative.”
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    Offshore Rigs Nosedive in US.

    The U.S. Offshore rig count is 29, down 5 rigs from last week, and down 31 rigs year over year.
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    Peak Oil Demand?

    Image title

    The world’s economy is experiencing transformational changes that, I believe, will dramatically alter patterns of energy use over the next 20 years. Exponential gains in industrial productivity, software-assisted logistics, rapid urbanization, increased political turmoil in key regions of the developing world, and large bets on renewable energy are among the many factors that will combine to slow the previous breakneck growth for oil.

    The result, in my opinion, is as startling as it is world-changing: Global oil demand will peak within the next two decades.

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    Missing 100m barrels.

    Oil-market watchers are struggling to reconcile the large estimated oversupply in the market with the much smaller buildup of reported inventories and narrowing contango in futures prices.

    Some blame the barrel counters who compile official statistics on supply, demand and stocks. But the truth is that information on the world oil market is incomplete and it is easy for hundreds of millions of barrels of oil to disappear from the supply chain without being counted.

    According to the three main statistical agencies, the global market has been oversupplied by between 1.5 million and 2.5 million barrels per day (bpd) since the start of the year.

    Stockpiles should have increased by between 200 million and 350 million barrels, according to the International Energy Agency, OPEC and the U.S. Energy Information Administration.

    U.S. crude stocks have indeed increased by around 100 million barrels since the start of the year while China's stocks appear to have risen by between 50 and 100 million barrels.

    But that still leaves more than 100 million barrels that have simply vanished from the international statistical system.

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    Alternative Energy

    Vestas wins Turkish wind farm order

    Danish turbine manufacturer Vestas has received an order for a wind project in Turkey.

    It will provide 25 turbines for the ‘Yahyali Wind Farm’ next year which has a capacity of 83MW.

    The project is expected to produce 303,000 MWh per year – equivalent to the electricity consumption of 182,000 people.

    The order also involves the supply and installation of the turbines as well as a 10-year management, states the company.

    Marco Graziano, President of Vestas said: “Turkish wind energy sector is expected to become one of the largest wind power markets in the world. Vestas is strongly committed to this market and we are pleased to contribute with our technologies and expertise to drive down the cost of energy in Turkey.”
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    Regulators give green light to largest Minnesota solar energy project

    The biggest solar power project in Minnesota won approval Thursday from state regulators.

    The $250 million Aurora Solar Project by Edina-based Geronimo Energy calls for the installation of ground-mounted solar panels at 21 mostly rural sites from Chisago County north of the Twin Cities to Waseca in southeast Minnesota. Geronimo plans to finish the project in 2016 and sell the power to Xcel Energy.

    “This signals that something big is happening in solar energy in Minnesota,” said Michael Noble, executive director of Fresh Energy, a St. Paul nonprofit that advocates greater reliance on renewable energy.

    It is by far the largest solar project approved in Minnesota, and in one sweep increases the state’s solar output sevenfold. The combined 100 million watts is the equivalent of a small traditional power plant. The largest of the 21 solar sites, near Paynesville, will cover an area the size of Lake of the Isles in Minneapolis.

    The state Public Utilities Commission (PUC) voted 3-0 to approve a permit for project, but rejected three of the original 24 sites, in Pipestone, Wyoming and Zumbrota, because of local land-use objections. Another site, near Hastings, is in jeopardy because of recently discovered soil conditions.

    Geronimo Energy said the project will go ahead without them.

    “We had offered more sites than we would use because of the need for flexibility if a site ended up not being constructible,” said Betsy Engelking, vice president for policy and strategy at Geronimo.
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    SolarCity, BofA create tax equity fund for smaller investors

    Top U.S. solar installer SolarCity Corp on Thursday said it has partnered with Bank of America on a $200 million fund that will enable smaller investors such as regional banks to finance the company's residential solar systems.

    The move is aimed at bringing new capital into the fast-growing rooftop solar industry and ultimately reducing the cost of that capital, SolarCity's chief executive, Lyndon Rive, said.

    "That will bring many more investors and then more competition, and then that will reduce the cost," Rive said in an interview.

    SolarCity and other solar financing companies for years have raised funds of $100 million or more to finance their rooftop systems from major corporations such as Google and U.S. Bancorp. These so-called tax equity funds allow the companies to claim the lucrative federal tax credits for solar energy systems. The funds generate returns of between 8 and 10 percent.

    Homeowners benefit by avoiding the hefty upfront cost of a solar system in favor of low monthly payments for about 20 years.

    SolarCity's new fund is intended to attract investors such as regional banks or smaller corporations that may only be able to contribute $20 million to $25 million.

    Bank of America will serve as the administrator of the fund and will provide whatever capital is needed to reach $200 million, Rive said, adding that he hopes the program is the first of many like it.

    "We will deploy that $200 million over the next year, but my goal is to get that to become multiple billions," Rive said.
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    Morgan Stanley sees 2.4m Australia homes with battery storage

    Investment bank Morgan Stanley has painted a bullish outlook for the home battery storage market in Australia, saying it could be worth $24 billion, with half of all households likely to install batteries to store the output from their solar panels.

    That will mean around 2.4 million households in the National Electricity Market (all states except WA and Northern Territory and off-grid areas), more than the double the 1.1 million households that already have solar in the NEM.

    That, the investment bank says, is likely to impact the incumbent electricity utilities, particularly AGL and Origin Energy, cutting earnings and forcing asset write-downs. So much so that Morgan Stanley has slapped a “cautious” tag on its outlook for the industry, suggesting they could be badly hit by lost revenue in coming years.

    Morgan Stanley’s conclusions came about from a survey it commissioned from 1,600 households, and the subsequent release of pricing by the new Tesla Powerwall battery storage offering.

    The survey – conducted in March before the Tesla release at the end of April – found half of all households had a strong interest in household solar and battery product, with a clear $A10k price point and 10-year pay-back period.

    “Battery adoption should follow solar adoption patterns (literally and figuratively) which, in our view, suggests a market of about 2.4m NEM households,” the analysts write, noting that around 1.1m households in NEM already have solar panels.

    “We think there will be strong interest in household solar and battery products, which transfer value away from the incumbent merchant utilities,” they write.

    “We think household battery take-up will follow a similar pattern to household solar take-up, especially seeing as around 1.1m households in the NEM could ‘retrofit’ their existing solar systems with batteries, especially where legacy Feed-in-Tariff schemes are set to expire.”
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    AGL targets 400MW rooftop solar in push into New Energy

    AGL Energy has for the first time revealed some of the details of its new energy strategy, revealing plans to install more than 400MW of solar PV on the rooftops of its customers over the next five years.

    This is part of ambitious growth plans for the New Energy division, headed by Marc England, which includes a revenue target of $400 million by 2020, and a “break even” year on profits in 2018.

    The division, which is to focus on new technologies such as solar, storage, electric vehicles and smart technologies for home energy management, is expected to lose $45 million a year as it builds its team to 200 or more.

    Full story and charts:
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    Oil Billionaire Makes $450 Million Bid on Russian Solar Ramp-Up

    Billionaire Viktor Vekselberg is out to prove that solar has a place in Russia, the world’s largest exporter of oil and gas.

    Hevel Solar, a venture between Vekselberg’s Renova and OAO Rusnano, plans 22.5 billion rubles ($450 million) of solar farms through 2018 and says diversifying power generation will benefit the country.

    “You don’t have to eat potatoes all the time,” Hevel Chief Executive Officer Igor Akhmerov said in an interview in Moscow. “You can have some salad as well.”

    At first glance, solar in Russia makes little sense. The country has surplus energy, and the sun barely crests the horizon in midwinter in Moscow. Yet it does shine along the nation’s southern border with Kazakhstan, where Hevel completed its second solar farm in the Orenburg region last week.

    Solar energy can help ease the burden on overloaded power lines, while replacing costly and polluting diesel generators in areas off the grid, according to Akhmerov. The plan isn’t to rival oil and gas, rather to deploy solar where it’s most useful.

    “You can’t compete with 70 years of planning and infrastructure,” he said. “You try to find a way to leapfrog problems to the front.”

    Capacity Auctions

    Hevel built its first solar farm, supported by government subsidies, in East Siberia, where sparse cloud cover provides sufficient sunny days for power generation. The project, which started selling output this year, was the first of Russia’s renewable-energy subsidy deals to produce power for the market.

    The country’s annual subsidy auctions, which began in 2013 and focus on solar, wind and small hydropower, show Russia has begun to seek a greater role for clean energy, targeting an expansion of domestic industry as much as environmental protection.

    Hevel opened a solar-panel factory in Novocherboksarsk this year. The plant supplies its own projects, and Hevel is in talks to supply other solar investors. The company will decide in July whether to upgrade the site, Akhmerov said.

    Set up in 2009, Hevel is 51 percent-owned by Renova and 49 percent by state nanotechnology company Rusnano. Vekselberg has moved into technology investments since building his fortune in oil, power and metals.

    Having its own panel supply has helped Hevel to weather the decline in the ruble, which has increased the cost of imports. Yet the currency’s weakness has prompted a change in funding strategy for its solar farms.

    “The original strategy was that we build it, de-risk it, and sell it” after proving consistent cash flow, Akhmerov said. “Our decision now, unfortunately, is to hold them.”
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    Duke Energy to convert shut down coal power plant to energy storage system

    Power Engineering reported that Duke Energy is teaming with LG Chem and Greensmith to convert a shut down coal-fired power plant into an energy storage system.

    The 2 MW battery storage project will be located at the site of the decommissioned W.C Beckjord coal-fired plant in Ohio and is expected to be operational by late 2015. LG Chem will supply the integrated operating system using advanced lithium-ion batteries. Greensmith will provide intelligent storage control and analytics software, and system integration services. Parker Hannefin will provide a 2 MW power conversion inverter.

    Duke Energy operates a 36 MW battery-based energy storage and power management system at the Notrees Windpower Project in Texas in partnership with the US Department of Energy.
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    New renewable energy model combines solar, bio-gas and H2

    To provide 24x7 uninterrupted power from renewable energy sources, experts from the UK and IITs are now working together to create a new model which combines the best of solar power, biomass energy and hydrogen.

    The first-of-its-kind UK-India experimental Bio-CPV project on development and integration of biomass and concentrating photovoltaic (CPV) system will soon light up a remote tribal hamlet in Shantiniketan, 180 km away from here.

    "The problem with dependence on solar power is that sunlight is not available 24x7 and 365 days a year. Therefore we are integrating it with biomass so that the power supply remains continuously available," project leader Prof Shibani Chaudhuri said.

    She said that this was the first time that the three sources of green energy would be integrated together in India.

    The installation work is expected to begin in October, this year and the entire model would be ready by 2016.

    Chaudhuri, who teaches environment at Visva-Bharati University in Shantiniketan, said the idea was to use solar power during the day and match it with biomass generation from local sources of organic material during the night.

    Hydrogen would also be used for emergency use. The UK-India research project is jointly funded by Research Councils UK (RCUK) and India's department of science and technology.

    From the UK, experts from the University of Leeds, University of Exeter, and University of Nottingham are sharing their inputs with scientists from Visva-Bharati, IIT Madras and IIT Bombay.

    Pearsonpally, a tribal village of Shantiniketan, has been selected as the site for installation of the integrated energy system.
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    Wind and Solar Account for 100 Percent of New US Generating Capacity in April

    In what is becoming a frequent occurrence, if not predictable pattern, renewable energy sources once again dominate in the latest federal monthly update on new electrical generating capacity brought into service in the United States.

    According to the recently-released "Energy Infrastructure Update" report from the Federal Energy Regulatory Commission's (FERC) Office of Energy Projects, wind and solar accounted for all new generating capacity placed in-service in April. For the month, two "units" of wind (the 300-megawatt (MW) Hereford-2 Wind Farm Project in Deaf Smith County, TX and the 211-MW Mesquite Creek Wind Project in Dawson County, TX) came on line in addition to six new units — totaling 50 MW — of solar.

    Further, wind, solar, geothermal, and hydropower combined have provided over 84 percent (84.1 percent) of the 1,900 MW of new U.S. electrical generating capacity placed into service during the first third of 2015. This includes 1,170 MW of wind (61.5 percent), 362 MW of solar (19.1 percent), 45 MW of geothermal steam  (2.4 percent), and 21 MW of hydropower (1.1 percent). The balance (302 MW) was provided by five units of natural gas.

    The total contribution of geothermal, hydropower, solar, and wind for the first four months of 2015 (1,598 MW) is similar to that for the same period in 2014 (1,611 MW, in addition to 116 MW of biomass).  However, for the same period in 2014, natural gas added 1,518 MW of new capacity while coal and nuclear again provided none and oil just 1 MW.  Renewable energy sources accounted for half of all new generating capacity added in 2014.

    Renewable energy sources now account for 17.05 percent of total installed operating generating capacity in the U.S.: water - 8.55 percent, wind - 5.74 percent, biomass - 1.38 percent, solar - 1.05 percent, and geothermal steam - 0.33 percent (for comparison, renewables were 13.71 percent of capacity in December 2010 — the first month for which FERC issued an "Energy Infrastructure Update").

    Renewable energy capacity is now greater than that of nuclear (9.14 percent) and oil (3.92 percent) combined. In fact, the installed capacity of wind power alone has now surpassed that of oil. In addition, total installed operating generating capacity from solar has now reached and surpassed the one-percent threshold — a ten-fold increase since December 2010.

    Note that generating capacity is not the same as actual generation. Electrical production per MW of available capacity (i.e., capacity factor) for renewables is often lower than that for fossil fuels and nuclear power. According to the most recent data (i.e., as of February 2015) provided by the U.S. Energy Information Administration, actual net electrical generation from renewable energy sources now totals 13.4 percent of total U.S. electrical production; however, this figure almost certainly understates renewables' actual contribution significantly because neither EIA nor FERC fully accounts for all electricity generated by distributed renewable energy sources (e.g., rooftop solar).
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    Vestas wins 83 MW order in Poland

    Vestas is to supply and install 25 V126-3.3MW wind turbine machines to a wind farm in Poland.

    The 83 MW wind turbine order, which includes a 15-year service agreement, is for the Korytnica North project in Poland, which was developed by Geo Renewables.

    Commissioning is set for the fourth quarter of 2015.

    Vestas Northern Europe president Klaus Steen Mortensen said,“With the delivery of the first V126-3.3 MW turbines to the Korytnica North project Vestas is now taking a significant step in reducing the cost of energy for wind in Poland.”
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    UK's Haven Power to provide Thames Water with renewable energy

    Britain's Haven Power has signed a 520 million pound ($800 million) deal with Thames Water to supply the water utility with renewable electricity over five years, Haven's parent company Drax Group Plc said on Tuesday.

    The deal carries an option for two further five-year renewals which could increase the overall value of the contract to more than 1.5 billion pounds over 15 years, it said.

    Haven Power supplies electricity to businesses and sources its power from Drax's power plant in Yorkshire, which is converting from coal to biomass.

    Two of the six units at Drax's 4-gigawatt plant have been converted to biomass and the firm plans to convert another this year.

    Thames Water already sources around 20 percent of its electricity from renewables such as solar, wind, hydro and biogas but the deal will enable it to meet all of its electricity needs from renewables.
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    Solar Fastest Growing US Electricity Source

     Move over shale. The sun is now the fastest growing source of U.S. electricity.

    Solar power capacity in the U.S. has jumped 20-fold since 2008 as companies including Apple Inc. use it to reduce their carbon footprint. Rooftop panels are sprouting on homes from suburban New York to Phoenix, driven by suppliers such as SolarCity Corp. and NRG Energy Inc.

    Giant farms of photovoltaic panels, including Warren
    Buffett’s Topaz array in California, are changing power flows in the electrical grid, challenging hydro and conventional generators and creating negative prices on sunny days. The surge comes after shale drilling opened new supplies of natural gas, contributing to the 47 percent drop in oil since June.

    “Solar is the new shale,” Michael Blaha, principal
    analyst of North American power at Wood Mackenzie Ltd. in Houston, said April 8. “Shale has lowered cost and enabled lower natural gas prices. Solar will lower costs for electricity.”

    Solar capacity surged 30 percent in 2014 to more than 20 gigawatts and will more than double by the end of 2016, according to the Washington-based Solar Energy Industries Association. That’s enough to power 7.6 million U.S. homes, up from 360,000 in 2009. The biggest gains will be in California, Arizona, Texas, Georgia, New York and New Jersey.

                             Rate Review

    Even with the rapid growth, solar still accounts for less
    than 1 percent of total U.S. power production, behind coal, natural gas, oil, nuclear and hydroelectric, according to the government’s Energy Information Administration. Because output suffers on cloudy or hazy days, grid operators have to keep conventional plants on standby. 

    Negative Prices

    On April 23, spot wholesale prices at Southern California’s SP15 hub, which includes Los Angeles and San Diego, averaged minus $60.94 a megawatt-hour for the 10 hours from 8 a.m., with solar accounting for as much as 23 percent of power generation in the hour ended at noon. The negative price meant that the seller, wanting to keep its generator running, paid the buyer to take the power.

    "I was here before we broke ground and seeing it then and now amazes me at how quickly we were able to build the project and coexist with the environment and generate 550 megawatts of green power,” Gary Hood, project manager for Topaz, about 250 miles southeast of San Francisco, said as he showed a visitor around.

    Berkshire is already producing power at Solar Star, which will be fully operational in the third quarter. Apple said in February it is investing $850 million in a plant that First Solar Inc. is building nearby.

    “We will see renewables increasingly make up part of the resources stack just because it makes economic sense,” Jonathan Mir, head of North American power and energy at Lazard Freres & Co. LLC in New York, said by phone May 13.

    “Appreciating that there are important qualitative
    differences between non-renewables and renewables, I don’t think people can simply say with a straight face any more that renewables are more expensive,” he said.

    Attached Files
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    Biomass is Germany's largest renewable

    Bioenergy generally comes from two sources: forestry and agriculture. Within the EU, Germany is the greatest producer of wood, and wood is by far the greatest source of bioenergy in the country. Roughly 40 percent of German timber production is used as a source of energy, with the rest used as material. Germany is also the leading biogas market – in 2010, more than 60 percent of Europe’s electricity from biogas was produced there, with further dynamic growth to come.

    In 2011, Germany was already using nearly 17 percent of its arable land for energy crops. Studies show that this share can be increased as a result of the decrease in population in the next few decades and increasing hectare yields in the agricultural sector. Environmental organizations, however, point out the environmental impacts of energycrops; for instance, the large increase in the cultivation of corn for use in energyproduction (and the problems associated with corn monocultures) is frequently associated with the plowing of valuable grassland. Energy crops can also have adverse effects on the quality of groundwater and cause soil erosion. To prevent these effects, Germany’s revised Renewable Energy Act (EEG) limits the amount of corn and grain eligible for special compensation. In addition, a set of incentives seeks to encourage increased use of less environmentally polluting substrates, such as material from landscape management activities and residues.

    Attached Files
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    Saudi Arabia's solar-for-oil plan is a ray of hope

    So what to make of the statement by Saudi Arabia’s oil minister that the world’s biggest oil exporter could stop using fossil fuels as soon as 2040 and become a “global power” in solar and wind energy?

    Ali Al-Naimi’s statement is striking as Saudi Arabia’s wealth and influence is entirely founded on its huge oil wealth and the nation has been one of the strongest voices against climate change action at UN summits.

    “In Saudi Arabia, we recognise that eventually, one of these days, we’re not going to need fossil fuels,” said Naimi at a business and climate conference in Paris on Thursday. “I don’t know when - 2040, 2050 or thereafter. So we have embarked on a program to develop solar energy,” he said in comments reported by the Guardian, Bloomberg and the Financial Times. “Hopefully, one of these days, instead of exporting fossil fuels, we will be exporting gigawatts of electric power.”

    Naimi also said he did not think that continuing low crude oil prices would make solar power uneconomic: “I believe solar will be even more economic than fossil fuels.”

    Paris is the venue for a crunch UN climate change summit in December and Thursday’s conference was part of the French government’s preparations. The Saudi signal provides a ray of sunlight for those hoping for a strong deal to tackle global warming.

    “Saudi Arabia is sending a strong signal to all oil producers and companies they must plan for an energy transition,” said Mark Fulton, former head of research at Deutsche Bank and advisor to the Carbon Tracker Initiative (CTI).

    “If Saudi Arabia is starting to hedge its bets by developing solar capacity, this could change the fundamentals of the oil market,” said James Leaton, CTI head of research.
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    China eyes low cost uranium miners

    China is looking for companies with large uranium deposits and low costs to meet domestic demand.

    Wang Ying, head of China National Nuclear (CNNC), has said the country is seeking miners that have least 30,000 tonnes of uranium resource, cash production no higher than US$25 a pound and total production costs of no more than US$45 a pound, Financial Post reports.

    Based on that criteria, deposits that could get immediate attention from Chinese investors are Rio Tinto's Roughrider, Cameco's Millennium, Fission Uranium's Patterson Lake South and UEX's Shea Creek. Other project that could attract interest in the long term, adds the report, is Denison Mines' Wheeler River project.

    Nuclear power firms in China are turning to the domestic market to raise capital for express expansion, after the government pledged to rely more on renewable energy for power generation.

    China is the country with the world’s largest nuclear growth. It has 22 operating reactors on the mainland with a total installed capacity of 20.3 gigawatts as of 2014, and other 24 reactors are under construction, data from the China Nuclear Energy Association shows.

    China aims to more than double its capacity to at least 58 gigawatts by 2020 and around 150 gigawatts by 2030.
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    Ukrainian tycoon says closes fertiliser plants after "unprecedented" government pressure

    A company controlled by Ukrainian tycoon Dmytro Firtash said on Thursday it was closing down its last two nitrogen fertiliser plants in Ukraine because of "unprecedented pressure" from the government which had deprived the plants of gas.

    A statement by his Group DF said the closure of the Cherkassky Azot and Rivneazot plants would have an effect on grain sowing in autumn and threaten thousands of jobs.
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    Vertical Harvest: Multi-Story Urban Farm Promises Produce and Impact

    For those who view urban farming as a niche movement, here is some surprising news: according to the Food and Agriculture Organization of the United Nations, 800 million people grow fruits and vegetables or raise animals in cities around the world. Urban farms now produce 20% of the world’s food. The report notes that urban farms yield up to 15 times more food per acre than their rural counterparts by reducing obstacles such as insect and animal interference, shorter and less expensive transportation, and more densely planted plots. A startup in Jackson, Wyoming is adding year round growing season to the list of urban farming benefits.

    Vertical Harvest of Jackson Hole, recently broke ground on one of the world’s first vertical farms. The three-story stack of hydroponic greenhouses will run unencumbered by Jackson’s harsh winters and four month growing season. With a 365-day growing season and 5 acres of farmland condensed to a 30 x 150 foot (or 1/10 of an acre) plot of land, Vertical Harvest will provide Jackson with up to 100,000 pounds of locally-grown produce. Through pre-purchase agreements, 95% of this produce has already been committed to local restaurants and grocery stores.

    The Vertical Harvest project is not without its high costs. Greenhouses use a large amount of energy, plus limited land and high demand have caused Jackson’s real estate costs to skyrocket. In addition, the town rests on a site of high seismic risk that requires an expensive steel super-structure. However, Yehia and McBride believe the $3.7 million price tag is worth the social and environmental benefits. With the support of city and state leaders, community members, and a successful Kickstarter campaign, Vertical Harvest is well underway. The farm will open in early 2016, with its first crops harvested a few months later.
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    John Deere warns the farm business is about to go from bad to worse

    Deere just put out an ugly outlook for farming and agriculture.

    The maker of construction and farming equipment reported second quarter earnings on Friday morning, crushing expectations for earnings and revenues.

    In the release, Deere noted a rise in sales of construction equipment, which offset losses in sales of agriculture machinery.

    The latter segment suffered because of a plunge in commodity prices.

    And Deere expects things in the farming industry to go from bad to worse.

    Read more:
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    Precious Metals

    Avrupa Drills 30 Meters of 6.92 g/t Gold at Slivovo

    Avrupa Minerals Ltd. 

    30 meters @ 6.92 g/t Au and 16.20 g/t Ag in SLV011
    Surface extension to Peshter Gossan identified
    Phases 1-2 drilling completed with 13 holes and 2,036 meters
    Phase 3 drilling started with up to 3,000 meters planned

    Avrupa Minerals Ltd. is pleased to report on progress at the Slivovo JV project in Kosovo. The project is operated by Avrupa, and funded by partner, Byrnecut International Ltd. (BIL).

    Avrupa completed five more drill holes at the Slivovo Project, totaling an additional 1,035 meters in three separate areas. The highlight of this new round of drilling was the gold intercept in SLV011, drilled parallel (-40 degrees to the northeast) to SLV004 and collared 25 meters to the southeast. SLV011 intercepted 30 meters of 6.92 g/t gold from a depth of 91 meters to a depth of 121 meters, where the hole crossed through a low angle fault, as in SLV004. Up-hole from this intercept, from a depth of 66 meters to the 91-meter level, the gold value averaged 1.02 g/t gold over 25 meters. The entire 55-meter intercept in SLV011 averaged 4.24 g/t gold.

    This phase of drilling was aimed at testing additional targets around the Slivovo license and the southern continuation of known mineralization at Peshter. In addition to SLV011 in the Peshter Gossan zone, two holes, SLV009 and SLV010, were drilled in the Xzemail zone, and two further holes, SLV012 and SLV013, were drilled into a newly discovered easterly extension of the Peshter Gossan. This drilling completes the Byrnecut 51% earn-in commitment.

    Paul W. Kuhn, President/CEO of Avrupa, commented, "Our Slivovo project continues to yield excellent results and new targets. Further work is clearly warranted to understand the source, controls, and potential size of the gold mineralization. We have a new drill rig on the property and have commenced further drilling in the Peshter Gossan zone. The objective of this drilling will be to determine if there is a potentially viable mineral resource at Peshter and other proximal targets, and to test several other outlying target areas on the Slivovo license. We are planning to drill up to 3,000 meters in this new phase of drilling."
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    Gold Road hikes Gruyera mineral resource 44%

    Junior gold developer Gold Road Resources has reported a 44% increase in mineral resources at its Gruyera mineral deposit, in Western Australia. 

    The deposit was estimated to host 137.81-million tonnes, grading 1.24 g/t gold for 5.51-million ounces of gold. This was a 1.67-million ounce increase compared with the maiden mineral resource estimated in 2014. 

    “Gruyera now has a scale of real significance. This substantial 44% increase in the Gruyera mineral resource to 5.51-million ounces reflects the quality of the deposit and the exceptional exploration and geological work our team has undertaken,” said Gold Road executive chairperson Ian Murray. He pointed out that since Gruyera’s discovery in October 2013, Gold Road has spent about A$10.9-million on the project, which equated to A$1.98/oz of mineral resource. 

    The latest resource upgrade was derived from 66 000 m of diamond and reverse circulation drilling, including 28 000 m drilled since the 2014 maiden mineral resource estimate. “This updated mineral resource will feed into the ongoing prefeasibility study. 

    We look forward to settling on the scale and power source at the end of Phase 1 next quarter,” said Murray, adding that the entire prefeasibility study would be completed by the end of the calendar year, and would be reported to market in early 2016.
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    China to launch $16bn gold investment fund

    The fund is part of a scheme known as the ‘Silk Road’ initiative, which aims to resurrect the ancient path as a modern transit, trade, and economic corridor to run from Shanghai to Berlin.

    China is setting up a new gold fund, expected to raise about $16 billion for investment into activities and business related to the precious metal, which may help to boost trade across Asia.

    The creation of such fund, state-owned CCTV reported, is part of a scheme known as the ‘Silk Road’ initiative, will be run by a new company to be established by gold producers and financial institutions.

    The fund may also include an exchange-traded fund for gold and investments in miners of the precious metal

    Two top local gold producers, Shandong Gold Group, the parent of Shandong Gold Mining, and Shaanxi Gold Group will own 35% and 25% of the new financing source respectively. The fund may also include an exchange-traded fund for gold and investments in miners of the precious metal, according to the report.

    China is the largest gold producer and consumer of the precious metal, and plays a key role in determining the overall direction of the gold market. According to the World Gold Council’s latest market analysis, jewellery demand in China dropped 10% in the first three months of the year, as slowing economic growth hit consumer sentiment in the world’s second-largest economy.

    The “Silk Road” project, also known as the “One Belt, One Road” plan, was officially launched in March by President Xi Jinping, with the goal of help the country’ economy double over the next decade.

    The ambitious vision is to resurrect the ancient Silk Road as a modern transit, trade, and economic corridor that runs from Shanghai to Berlin. The 'Road' will traverse China, Mongolia, Russia, Belarus, Poland, and Germany, extending more than 8,000 miles, creating an economic zone that extends over one third the circumference of the earth.

    Xi Jinping has said that the creation of the new “Silk Road” would result in around $2.5 trillion of additional trade for all those involved over the next 10 years. However, the plan – which includes investment in transport and energy infrastructure – comes amid growing concern over China’s slowing economic growth and decline appetite for commodities and gold.
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    Russia boosting gold holdings as defence against 'political risks' -

    Russia is increasing its gold holdings because gold is a reserve asset that is free from legal and political risks, a senior central banker said on Tuesday.

    The comments by Dmitry Tulin, who manages monetary policy at the central bank, reflect Russian fears that the country's overseas assets could be frozen as part of a possible toughening of Western sanctions over the Ukraine crisis.

    "As you know we are increasing our gold holdings, although this comes with market risks," Tulin told lawmakers in the lower house of parliament.

    "The price of it (gold) swings, but on the other hand it is a 100 percent guarantee from legal and political risks."

    According to central bank data, Russia's gold reserves rose to 40.1 million troy ounces as of May 1 compared with 39.8 million ounces a month earlier.

    Russia increased its gold holdings for many months in a row last year, as shown by central bank and International Monetary Fund figures.

    Western sanctions imposed because of Russia's actions in Ukraine have not targeted government assets abroad, but Russia has been reducing its holdings of assets such as U.S. Treasury bills, fueling speculation that it regards them as vulnerable.

    Russia also faces over $50 billion in claims from former shareholders of oil company Yukos, who have vowed to target Russian state assets in the West.

    In 2008, central bank accounts in France were frozen at the request of Swiss firm Noga, which sought to seize Russian state assets abroad in an attempt to recover debts arising from an oil-for-goods deal. The central bank later argued in court it was independent from the government, and the accounts were unfrozen.
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    Barrick to sell 50 pct in Papua New Guinea unit to China's Zijin

    Canadian miner Barrick Gold Corp said it would sell 50 percent stake in its unit that manages the Porgera gold mine in Papua New Guinea to China's Zijin Mining Group Co Ltd for $298 million in cash.

    The deal, a part of Barrick's plan to reduce net debt by at least $3 billion by the end of the year, comes a day after the world's largest bullion producer sold its Cowal mine to Evolution Mining for $550 million.

    The unit, Barrick Niugini, owns 95 percent in the Porgera mine and the Papua New Guinea government owns the rest.

    Zijin and Barrick will jointly control Barrick Niugini after the sale, which is expected to be completed in the third quarter, the Canadian miner said on Tuesday.

    Barrick said it expected its share of gold production from the Porgera mine to rise to 500,000-550,000 ounces this year from 493,000 ounces in 2014.
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    Base Metals

    Ivanhoe CEO heads to DRC this weekend to address confusion

    Africa-focused project developer Ivanhoe Mines will send a high-level delegation to the Democratic Republic of Congo (DRC) this weekend to address any “misunderstandings” that might exist between itself and the government following Ivanhoe’s announcement on Monday to sell nearly half of the Kamoa copper project to a Chinese company. 

    Bloomberg reported that the DRC government, which owned a minority stake in the project billed as the world’s largest undeveloped copper deposit, was reportedly sidestepped in discussions between shareholders about the $412-million deal that would see Zijin Group buy a 49.5% stake in Ivanhoe subsidiary Kamoa Holding, which held a 95% stake in the project. 

    However, on an analyst conference call on Thursday, Ivanhoe CEO Lars-Eric Johansson said while the DRC held a 5% interest in the Kamoa project since 2012, when the exploration permit was drafted, senior government representatives were present at discussions before the Zijin agreement was finalised.

    “We are not aware of any Congolese approvals that we need to obtain,” he said, adding that the deal was expected to close at the end of July, subject to it receiving approval from the People's Republic of China government. 

    Johansson said additional discussions were under way to address any “misunderstanding” and Ivanhoe had “for some time now” offered to sell a 15% stake to the DRC on commercial terms. 

    “I will lead a delegation of senior Ivanhoe representatives this weekend to engage the DRC government, including the minister of minerals. “We are confident that all issues will be resolved before the Zijin deal closes,” Johansson said.
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    Nevada Copper Announces Positive Feasibility Study Results

    Nevada Copper Corp. is pleased to announce the results of its National Instrument 43-101  Technical Report Integrated Feasibility Study for its 100% owned Pumpkin Hollow Copper Project located near Yerington, Nevada.

    Highlights of the Integrated Feasibility Study (All dollar amounts are stated in United States currency):

    Long mine life of 23 years with low-risk profile located in an ideal mining jurisdiction close to existing infrastructure, an increase of 5 years from the first published integrated feasibility study, with production ramp-up targeted for 2018;

    Assuming the Base Case of US$3.15 copper, US$1,200 gold and US$18 silver, the Integrated Project generates Life-of-Mine ("LOM") after-tax net cash flow of US$2.6 billion, [email protected]% of US$1.1 billion, an after-tax IRR of 15.5% with 4.9 year payback;

    Significant LOM metal production of 4.5 billion pounds (2.05 million tonnes) of copper, 512,000 ounces of gold and 15.6 million ounces of silver in a quality copper concentrate. Average annual copper production of 275 million pounds in years 1 to 5;

    The project development consists of a 63,500 tons/day open pit mine and 6,500 tons/day underground mine, feeding a single 70,000 tons/day concentrator, generating substantial annual cash flow over LOM;

    Proven and Probable Mineral Reserves, including open pit and underground mineable, are 572 million tons of ore grading 0.47% copper equivalent(1), containing 5.05 billion pounds of copper, 761,000 ounces of gold and 27.6 million ounces of silver;

    Initial capital costs are estimated to be $1.07 billion including contingencies, excluding working capital of $34 million. Sustaining LOM capital is $0.64 billion;

    Low LOM site operating costs of $11.59 per ton of ore-milled (Year 1 to 5 - C1 Production Costs at $1.49/lb. payable copper);

    The IFS includes drilling data to 2011 for the underground deposits and 2013 for the open pit deposits. Further upside and optimization potential exists from current planned drilling in 2015 which is not included in the current IFS;

    The IFS confirms the technical and financial viability of constructing and operating a 70,000 tons/day copper mining and processing operation at Pumpkin Hollow comprising a single large concentrator with mill feed from both open pit and underground operation.
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    Chile regulator seeks sanctions against Lundin’s Candelaria mine

    The Candelaria mining complex consists of an open pit mine and an underground mine providing copper ore to an on-site concentrator with a capacity of 75,000 tonnes per day.

    Chile's environmental regulator SMA said on Wednesday it will seek new sanctions against Lundin Mining’s (TSX:LUN) Candelaria copper mine in the country’s north for not complying with some of the country's environmental requirements.

    Inspections that took place between 2013 and 2014, revealed 16 infractions, nine of which were considered very serious, the SMA said in an e-mailed statement.

    The most severe violation, added the body, is the company’s failure to reduce use of fresh water from the area, as well as ongoing damage to groundwater from the Copiapo River.

    The company has 10 days to submit a plan to correct the irregularities detected by the SMA or 15 days to appeal the charges.

    Candelaria, which first went into production in 1993, had a roughly 14-year mine life when Lundin acquired the asset from Freeport in July last year, and two new discoveries extend the reserves life by around three years. The Susana and Damiana underground deposits are of a higher grade, are below the existing open pit at Candelaria and can be easily accessed from existing and new portals from the pit. The new deposits could come on stream within three years.

    Attached Files
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    Aluminium import premiums slip to $130-$150/mt CFR basis

    Chinese import premiums for Good Western aluminium slipped further this week to $130-$150/mt CFR plus LME cash, down from $150-$200/mt last week and also from $260-$280/mt in April.

    Market sentiment remained bearish as aluminium prices remained low on the London Metal Exchange, aluminum premiums to South Korea and Japan narrow, and domestic Chinese metal outlook bearish, sources said.

    There was a lack of actual import trade to China this week despite the lower LME and premiums, as domestic Chinese aluminium prices continued below import levels, sources added.

    "The arbitrage window is opening and we've had queries asking about premiums again, but the Chinese still cannot work with the current levels -- there's still a gap of a few hundred yuan between import and domestic metal prices," a Shanghai-based trader said.

    "There's also expectation that Chinese domestic metal prices will lower further, maybe dropping below Yuan 13,000/mt again, so there's no rush to buy," he said.

    Another Shanghai-based trader agreed, adding that the market was also eying the third-quarter contract talks starting in Japan in the near term, which is widely expected to settle at much lower than the second-quarter premium of $380/mt.

    "The arbitrage window is almost there, but not yet...people expect Q3 for Japan to be much lower, so they are all very cautious," he said.

    A north China consumer said they were offered premiums this week at $135/mt delivered to Shanghai bonded warehouses, but were not interested.

    "It's still not enough. We expect Japan Q3 to drop to $100 plus, so we want to wait," the consumer source said.
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    China's Zijin to buy stake in Ivanhoe's DRC copper project

    Chinese mining company Zijin Mining Group has agreed to buy almost half of the Kamoa copper project in the Democratic Republic of Congo (DRC) from Ivanhoe Mines for $412 million, the companies said on Tuesday.

    Under the deal, Zijin will buy through its subsidiary, Gold Mountains International Mining Company Limited, a 49.5 percent stake in Ivanhoe Mines' subsidiary Kamoa Holding Limited, which currently owns 95 percent in the DRC copper project.

    The mining sector has been hit in the last three years by a steep decline in metals prices but copper is seen by analysts as one of the commodities with the brightest prospects given some supply constraints.
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    Mincor warns of output cut unless nickel price turns

    Shares in Australia's Mincor Resources dropped more than 3 percent to a three-week low on Tuesday after the nickel miner said it was considering production cuts due to persistent low prices for the steel-making metal.

    Australia's sixth-largest nickel miner said it still expected to reach its fiscal 2015 production target of about 8,500 tonnes of contained nickel, but may need to reduce future output unless prices turn around.

    Nickel is down 12 percent since January, extending a protracted plunge that has more than halved the metal's price since 2011.

    Mincor said its flagship Miitel and Mariners mines will be subjected to a review that could lead to lower output starting in November.

    A freeze on capital development during the review meant 50 jobs would go, according to the company.

    Mincor Managing Director David Moore in a statement said he regretted the job losses, "but after four years of falling nickel prices, changes were required in order to safeguard the future of the company."

    To date there is little sign of a turnaround in nickel. London Metal Exchange warehouse stocks of the metal used in manufacturing stainless steel MNI-STOCKS stood at a record 455,790 tonnes, according to the latest Reuters data, reflecting sluggish global demand.
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    Australian miner Independence launches $1.4 bln bid for Sirius

    Australia's Independence Group Ltd on Monday launched a friendly A$1.8 billion ($1.4 billion) scrip and cash takeover of fellow Australian miner Sirius Resources Ltd.

    The acquisition, which has the blessing of both boards, is aimed at forming a diversified base metals and gold mining group, Independence said in a statement.

    Sirius ignited interest in the Australian nickel sector three years ago when it made a major discovery, found by prospector Mark Creasy while looking for debris from NASA's Skylab space station.

    Creasy, a major shareholder in Sirius, has indicated he will endorse the acquisition in the absence of a superior proposal, Independence said.

    Sirius shareholders will receive 0.66 Independence shares for every one Sirius share, plus 52 Australian cents, for an indicative value of A$4.38 per share, or A$1.8 billion, Independence said.
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    Steel, Iron Ore and Coal

    Teck reacts to depressed coal prices by halting Canadian mines

    Canada's largest diversified miner Teck Resources announced Thursday it will implement temporary halts at its six Canadian steelmaking coal operations for about three weeks during the third quarter of the year.

    The move, said Vancouver-based company, will allow it to align production and inventory with changing coal market conditions. The miner added it will consider additional production adjustments over the course of 2015.

    The suspension will reduce third-quarter production by about 1.5 million tonnes, or 22%, to 5.7 million tonnes. Annual coal production is now estimated at 25 million tonnes to 26 million tonnes.

    “Rather than push incremental tonnes into an over-supplied market, we are taking a disciplined approach to managing our mine production in line with market conditions,” Don Lindsay, President and CEO said in the statement. “We will continue to focus on reducing costs and improving efficiency to ensure our mines are cash positive throughout the cycle and well-positioned when markets improve.”

    Last month, Teck decided to cut its dividend to shareholders from $0.45 per share to $0.15 starting June 15 to weather weak prices that the company attributes to global oversupply.

    Attached Files
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    Tata Steel unit sale talks continue but other options eyed

    Tata Steel is in talks with employees about transferring its "long products" unit into a wholly-owned subsidiary, but said talks to sell the business to Swiss-based Klesch Group continue.

    The steelmaker said in October last year it was in talks to sell the unit, which employs 6,500 people mostly in Britain, to Klesch Group, a global commodities business involved in chemicals, metals and oil production and trading.

    British trade union Community welcomed the talks, even as it is due to declare on Friday the results of an industrial action ballots over Tata Steel's proposal make changes to its employees' final-salary pension scheme.

    "We are pleased that Tata Steel has taken forward one of the key recommendations of the Syndex report into alternatives to the sale to the Klesch Group," said Roy Rickhuss, general secretary of Community.

    The Syndex report, commissioned by trade unions to look into alternatives to a sale, recommended the creation of a standalone business as this could enable access to statutory funding or new investment not currently available.

    A Tata Steel spokesman confirmed the talks, but said: "In order to maximise the prospects of securing a viable future for Long Products Europe, Tata Steel is continuing its discussions with the Klesch Group about a potential sale of the business."

    Klesch has a record of swooping in on ailing businesses and is credited with bringing distressed debt investing -- or "vulture capitalism", as it is described by critics -- across the Atlantic.

    Tata Steel has been forced to slash costs and jobs since 2007 when it bought Anglo-Dutch producer Corus for $13 billion.
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    S African power plants face 17Mt coal shortfall

    South African power utility Eskom faces a 17-million tonne coal shortfall by 2017 at its coal-fired power plants, a Cabinet Minister said on Wednesday. 

    The shortfall is anticipated in 2015 at Matla, Tutuka and Hendrina power stations and in 2016 at Kriel and Arnot Power Stations, Public Enterprises Minister Lynne Brown said in a written reply to questions in parliament.
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    Australian mine magnate Rinehart loses control of family trust - court ruling

    Australian iron-ore magnate Gina Rinehart's eldest daughter has been granted control of the multi-billion dollar family trust following the family's long-running legal battle.

    The order in the New South Wales state Supreme Court said Bianca had demonstrated the ability to robustly assert the rights of the trust against her mother and her company Hancock Prospecting. 

    Bianca and her brother John Hancock launched legal action against their mother in 2011, alleging she acted "deceitfully" and with "gross dishonesty" in her dealings with the trust, set up in 1988 by her father, Lang Hancock, with her children as the beneficiaries.
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    Essar Steel posts profit of Rs 648 crore in FY15

    Essar Steel reported a net profit of Rs 648 crore for the last financial year against a loss of Rs 1597.14 crore a year earlier, helped by higher operating margins and sale of assets.

    The Ruia-controlled Essar Steel's operating margin doubled to 18 per cent. The company attributed stronger margins to boost in sales of higher margin value added steel. The segment contributed 62 per cent of sales against 50 per cent sales last year. Gross revenue of the company rose 20 per cent to Rs 17,162 crore.

    ..Privately-held Essar Steel sold assets worth Rs 4850 crore during the year. Oxygen plant was sold for Rs 850 crore, while the Odisha slurry pipeline was sold for Rs 4000 crore. The company plans to sell its Vizag slurry pipeline and coke ovens for Rs 3600 crore each in the current financial year. Promoters infused Rs 1300 crore into the company during the year.

    The asset monetization plan and equity infusion is aimed at bringing down the leverage of the company and increasing liquidity. Care Ratings has a 'default' rating on Essar Steel since more than a year. The company said it will approach the rating agency soon for an upgrade.

    Essar Steel has a total debt of Rs 30,000 crore (about $4.7 billion) of which it has dollarized about Rs 2.2 billion, helping it reduce its interest cost to 9 per cent from 12 per cent. The remaining loan will be restructured under Reserve Bank of India's scheme, giving it a longer repayment period.

    "The company's strategy is to focus on value-added products, introducing new products, ramping up the production and improve profitability to ensure sustainable operations of the company," said Executive Vice Chairman Firdose Vandrevala.

    The company hopes to raise the capacity utilization to 80 per cent this financial year from less than 50 per cent at the end of last financial year. The company has a total capacity of producing 10 million tonne (mt) of liquid steel. However, the utilization has so far been constrained due to delay in completion of the plant and unavailability of gas.

    Read more at:
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    No point in top iron ore miners cutting supply: Goldman

    The world’s largest iron ore producers are moving in the right direction by continuing to increase output even as demand cooled in top consumer China, sending prices tumbling and leaving smaller, high-cost producers struggling to survive.

    That seems to be the main conclusion of experts from Goldman Sachs Group, which wrote in a report Wednesday that “efforts to support prices via voluntary production cuts would be counter-productive,” as quoted by Bloomberg.

    While such cutbacks are appealing in theory, any such proposal is misguided, according to Goldman's analyst Christian Lelong.

    Brazil’s Vale, BHP Billiton and Rio Tinto, the report argues, are unlikely to create a cartel and agree on output cuts to stabilize prices, with waning demand expected to increase competition.

    “First, production cuts would go against the prevailing trend of improving efficiency,” Lelong wrote. “Second, the required coordination among dominant producers with different incentives would be more difficult to achieve among three companies; successful cartels in oil and potash have featured only one or two dominant producers.”

    Glencore chief executive Ivan Glasenberg and Fortescue’s Metals Group boss Andrew Forrest, among several others, have warned that oversupplying markets regardless of demand was damaging the industry’s credibility.

    Prices for the steel making material hit $46.70 a tonne in April, the lowest in a decade, though they have picked up since then to around $62 this week.

    Goldman expects the iron ore "war of attrition" will continue while prices gradually decline toward its $40 per metric ton forecast by 2017.

    Attached Files
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    India's coal industry

    With Chinese demand for seaborne coal stalling, India has become the great hope of the seaborne coal market.

    However, improvements in inland transport infrastructure are critical both to cope with rising imports and the delivery of competing plans for a huge rise in domestic production.

    Investment in India's transport infrastructure could prove a double-edged sword for trade in seaborne coal.

    Growing domestic production and rapidly increasing import volumes are stretching the capacities of India's railways and ports.

    A shortage of railcars and line congestion mean that over 50 million tons of coal piles up at the end of each year at the pit-heads of Coal India Ltd, the country's state-owned coal miner.

    The transportation issue is set to become even more acute, if the government's ambitious new coal production plan proves successful.

    CIL, which accounts for over 82% of annual Indian coal production, has been directed by the National Democratic Alliance government to double its production to a billion tons in the next five years.

    Coal demand over this period is expected to rise to 1.2 billion mt.

    The power sector alone is expected to account for 65%, equivalent to over 750 million tons of annual coal consumption.

    CIL managed 7% growth in the financial year to March 2015, following five years that saw average annual production growth of just 1.5%. Growth this year is targeted at 11%, which would take CIL production to 550 million tons.

    CIL has approved a plan to raise production to 908 million mt by March 2020 and is currently working on a strategy to add a further 98 million mt/year production capacity in the same time frame.

    The mining giant will undertake 126 new mine and old mine expansion schemes in addition to the 149 such projects already under way. The plan requires 12% average annual growth.

    Central to the strategy will be better coordination between the eight producing subsidiaries of CIL, the railways and coal-producing states.

    The government also expects other producers to increase output five-fold to over half a billion tons by 2020. This vote overcame a 15-year legislative logjam, in which coal mine workers' unions had blocked any change to the law that nationalized private coal mines over 40 years ago.

    If this massive expansion can be achieved, it would mean a drastic cut in currently forecast levels of coal imports, sending another shockwave through already struggling seaborne coal markets.

    However, the degree to which India's coal demand can be met, either by domestic demand or imports, depends critically on rail links between ports, new mines and their customers.
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    Rescue in the works for indebted Sinosteel

    CaixinCaixin reported that China's economic slowdown and slumping iron ore prices have intensified what's now a 2 year old financial crisis at one of the country's biggest resource trading companies, Sinosteel Corporation.

    Sources from banks recently said that new, unnamed investors are poised to rescue Sinosteel as part of a broad restructuring plan. The plan was expected to be announced by the end of June.

    The proposed restructuring could include a debt relief plan that caps painful negotiations between state owned Sinosteel and its state owned creditors. The talks began in January, shortly after the State Council got the ball rolling by ordering the China Banking Regulatory Commission to arrange meetings between Sinosteel executives and bankers.

    The order by the cabinet was designed to end a financial impasse that's cast a cloud over Sinosteel's future. At the end of last year, the company and its 72 subsidiaries had fallen behind in repaying about CNY 75 billion borrowed in recent years from some 80 domestic and foreign banks. The debt crunch began in 2013, the most recent year for which the firm released financial results.

    Sinosteel said that the company supplies state owned steel mills with iron ore, coke and other raw materials from domestic and overseas mines. The company is also engaged in logistics and the rare earths business. It employs more than 46,000 people. About a decade ago it became China's first major state owned company to expand overseas, investing in mines in Australia, South Africa and Zimbabwe.

    At least part of the company's debt problem has been traced to a 2008 decision to buy the Australian iron ore mining company Midwest Corporation for 9 billion. That investment has proven costly in the face of the recent ore price decline.
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    US Clean Power Plan Will Double Coal Plant Closures

    A new government analysis of President Barack Obama’s signature effort to fight climate change affirms what critics suspected: the proposal could further weaken an already battered coal industry.

    Electricity generation from the carbon-intensive fossil fuel would fall by 90 gigawatts, more than twice the decline government analysts had predicted as recently as April, according to a report released Friday by the Energy Information Administration. There were about 292 gigawatts of coal-fired generation capacity in 2014, according to EIA.

    Most of the coal-plant closures would occur by 2020, when the Environmental Protection Agency’s proposal to cut carbon dioxide emissions would kick in. Consumers may also take a hit as electricity prices would increase as much as 7 percent on average by 2025, partly because of the costs of building new power plants.

    “In short, EIA confirms EPA’s rule is all pain, no gain — a symbolic gesture that continues the administration’s policy path for destroying high wage jobs for generations,” said Hal Quinn, chief executive officer of the National Mining Association, a lobbying group that represents companies including Peabody Energy Corp.

    Coal, which has served as the backbone of U.S. electricity generation for decades, is in a steep downturn amid competition from lower-cost natural gas and pressure to meet tougher emissions standards.

    The Obama administration’s proposal, released in June, is not final. Supporters, including Senator Maria Cantwell, a Washington Democrat, said the EIA projected the plan would cut carbon emissions from all U.S. power plants 25 percent below 2005 levels by 2020.
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    Yunnan Jan-Apr coal output slumps 49pct

    Southwestern China’s Yunnan province produced 13.18 million tonnes of coal over January-April, slumping 49% from the year before, data from the National Development and Reform Commission (NDRC) showed on May 26.

    Total commercial coal sales during the same period also plunged 49.2% on year to 15.82 million tonnes, including coals sold out of the province at 1.59 million tonnes, down 65.4% on year, the NDRC data showed.

    Total rail coal transport in the first four months was 630,000 tonnes, down 52.8% on year, data showed.

    By end-April, coal enterprises across the province held 1.05 million tonnes of coal, down 51.8% from a year ago but up 18.0% from March.
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    China's coal production falls 6.1 pct

    Coal production in China, the world's largest producer and consumer of the mineral, declined 6.1 percent in the first four months this year as the impact of the government's clean air and renewable energy policies began to weigh on the industry.

    Production totaled 1.15 billion tonnes between January and April, with the pace of decline accelerating from a 3.5-percent fall registered in the first three months of the year, according to data released Tuesday by the National Development and Reform Commission (NDRC).

    Coal imports also fell during the period, plunging by 37.7 percent from one year earlier to 69 million tonnes, the NDRC said in a report on its website.

    Coal consumption accounts for about 66 percent of China's primary energy consumption, 35 percentage points higher than the world average. The country aims to bring its share of non-fossil energy to 15 percent by 2020 and 20 percent by 2030.

    China's coal output fell in 2014 for the first time this century as a result of slowing economic growth, government efforts to reduce air pollution and increased investment in renewable energy. Analysts expect production to further decline this year.
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    China’s Apr coking coal imports slump 42pct on yr thermal coal 25.7pct

    China’s coking coal imports slumped 42% year on year but up 27.1% from March to 3.75 million tonnes in April – the second consecutive year-on-year drop, showed the latest data from the General Administration of Customs (GAC).

    Imports from top supplier Australia dropped 45% from the previous year but up 10.5% from a month ago to 1.69 million tonnes in April.

    Over January-April, China’s coking coal imports fell 24.5% on year to 14.67 million tonnes.

    Top supplier Australia exported a total 7.04 coking coal to China during the same period, down 26.7% year on year.

    China’s thermal coal imports, including bituminous and sub-bituminous coal, dropped 25.7% on year but rose 20.6% on month to 8.76 million tonnes in April – the second straight monthly increase, according to the latest data released by the General Administration of Customs (GAC).

    Australia remained the largest supplier, exporting 4.62 million tonnes of bituminous and sub-bituminous material to China in April, rising 22.0% on month but down 0.5% on year.

    In the same month, China's imports of Indonesian thermal coal rose 15.1% from March but fell 17.7% from a year ago to 3.05 million tonnes.

    Top supplier Australia exported a total 14.81 million tonnes of thermal coal to China during the same period, down 22.1% from the year before.

    Lignite imports from the top supplier Indonesia stood at 16.11 million tonnes between January and April, down 33.45% on year.
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    China looking to invest in Fortescue?

    The Australian Financial Review reported that Chinese-linked companies had sought permission from the Foreign Investment Review Board (FIRB) to invest in Fortescue, Australia's third-largest iron ore producer.

    "Fortescue is not aware of FIRB applications by third parties and is in compliance with its continuous disclosure obligations," the company said in a statement to the Australian stock exchange.

    Fortescue's shares touched a two-week high of A$2.495 after the report, which said Fortescue had held talks with China's Baosteel and CITIC about a recapitalisation of the company.

    One or both had applied to FIRB to proceed with an investment, following discussions with Fortescue that only concerned buying a stake or increasing an existing stake, not a full takeover, the paper cited unnamed sources as saying.

    Baosteel and CITIC could not immediately be reached for comment. FIRB declined to comment.

    Fortescue has been struggling to manage its debt following a 55 percent slump in iron ore prices over the past year and a half and its executives have said they would be willing to sell down stakes in mines.

    Fortescue is the only major iron ore producer that does not have any partners in its mines.

    The company built itself from scratch with the help of Chinese funding, as Beijing wanted to ensure that its steel makers would not be wholly dependent on the mega miners, Brazil's Vale, Rio Tinto and BHP Billiton .

    China is unlikely to let Fortescue sink, but any Chinese move to gain more influence over such an important player would be sensitive and regulators would scrutinise it carefully.

    China's Hunan Valin is already Fortescue's second-largest shareholder with a 14 percent stake, while Baosteel has a joint venture with Fortescue on undeveloped magnetite iron ore assets.
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    Arch Coal in talks with restructuring advisers to cut debt

    U.S. miner Arch Coal Inc is in talks with restructuring advisers as it seeks to reduce its debt, the Wall Street Journal reported on Friday, citing sources familiar with the matter.

    Arch Coal and its rivals have been under pressure as power utilities switch to cheaper natural gas and big consumers such as China reduce imports.

    The company is working with lawyers at Davis Polk & Wardwell LLP and financial advisers at Blackstone Group LP, the report said, citing the sources. 

    However, Arch Coal is not looking at bankruptcy for a broad restructuring of its debt load, and is exploring ways to cut debt through deals with bondholder groups, the Journal reported.

    The company is in discussions with holders of its bonds due in 2020, the report said. Advised by investment bank Moelis & Co , they include Blackstone's credit arm, GSO Capital Partners and hedge fund Hutchin Hill Capital LP, the Journal reported, citing one of its sources.

    Arch Coal said in a statement after the market closed that it does not satisfy the New York Stock Exchange's continued listing standard.

    Arch Coal, which posted a bigger-than-expected quarterly loss last month, had a total debt of $5.15 billion as of March 31.
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    China Gaining Influence In This Key Emerging Coal Market

    Another bank, Credit Agricole, voted this week to stop financing coal mining. Suggesting this is becoming a space with little competition for investment -- and perhaps therefore considerable opportunity.

    Like the newly opening coal fields of Kenya. Where this week the government awarded two new exploration blocks -- just the second and third ever offered in the country.

    Kenya's energy and petroleum ministry said Tuesday it has chosen developers for the so-called A and B blocks of the Mui Basin, in the country's eastern region.

    The two coal licenses will go to a consortium including China's HCIG Energy Investment Company -- and also including local player Liketh Investments Kenya. The Chinese developers are reportedly also providing up to $2 billion in funding for a coal-fired power plant to be fed by supply from these blocks.

    The move is a critical one for politics in this emerging energy supply region. Showing that China is further cementing its influence here -- after Chinese firm Fenxi Mining was previously awarded mining rights for Kenya's first-ever coal license in 2011.

    A number of Chinese engineering firms have also partnered with local investors on a proposed 1,000 MW coal-fired power plant near the coastal town of Lamu.

    Such influence could be important here. Given that eastern Africa -- and particularly Kenya -- is shaping up as one of the only untapped coal supply sources for Asia.
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